A Million Dollar Reason Why Stock Trading Delays Must Be Fixed Fast
September 5, 2009 by Lance Jepsen
Filed under Stock Market
Computer programmers have created an inexpensive solution for diagnosing delays in data center networks as short as a hundred millionth of a second. These very short delays measured in millionths of a second can cause multi-million dollar losses for investment banks running automatic stock trading systems.
The University of California and Purdue teamed up to create this cheap solution. The programming code was presented on August 20th, 2009 at SIGCOMM.
This new programming method enables data centers to diagnose delays as short as millionths of a second in routers. The programming method also will detect packet loss as infrequent as one in a million at every router in a data center’s network.
The programming code is called the Lossy Difference Aggregator. It requires no new hardware and has no performance penalty on the router.
Institution stock traders and corporations that sell online stock trading platforms will go crazy for this technology. The reason is that if an online brokerage firm has a stock trading algorithm that reacts to an incoming market data feed even just 100 microseconds faster than the competition, they can buy millions of shares before their competitors.
Online automated exchanges like the American Stock Exchange use custom designed hardware boxes that are very expensive. These boxes are put on routers and key points in a data center network. These external hardware boxes are too expensive to put on every router within a data center network making it difficult to trouble shoot and find a problem router. By the time the problem is detected and fixed, it will cost the company anywhere from 2 to 4 million dollars because of delayed buy and sell orders.
This computer programming code will allow router vendors to add loss tracking on every router at no additional cost. This will completely eliminate the need for specialized external router monitoring devices.
The old school way of monitoring a routers performance is to use an external device to track when a packet arrives and when it leaves the router and then have it calculate the difference.
Instead of summing the arrival and departure times of all packets traveling through a router, the computer programmers new system randomly splits incoming packets into groups and then adds up arrival and departure times of each of the groups separately. As long as the number of losses is smaller than the number of groups, at least one group will give a good estimate.
Subtracting the sums of the groups and then dividing by the number of messages gives an approximation of the average delay with very little performance reduction of the router. It has about the same overhead as a series of small counters.
With this computer programming code built into every router, a data center manager will be able to quickly pinpoint the offending router and interface that is adding extra millionth of a second delays or losing even one packet in a million.
By Lance Jepsen. For free stock trading advice by master stock traders and free stock charting software go to stock trading
