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In brief, colocation beats the speed of light

Thu, 09 Apr 2015 05:16:34 GMT

Sea-based XbandA recent commentary article Physics in finance: Trading at the speed of light (Mark Buchanan, Nature, 11 February 2015) made a seemingly logical statement: In order to take advantage of price differences between two distant financial exchanges, it is best to station a trading strategy computer at the midpoint between the two exchanges, for example, on a ship in the middle of an ocean. The geodesic midpoint is where the two price levels can be compared at the earliest possible time. Therefore -- the enticing logic goes -- this is also the ideal point where the arbitrage decision can be made -- buy at a low price on one side and sell at a higher price on the other side.

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