Slowing Down A Stock Exchange With 38 Miles Of Cable

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  • Published on: 04 February 2019
  • High-frequency traders have a few tactics on stock exchanges: but simply put, they gather price information faster than anyone else, sometimes even faster than the markets themselves, and use that to make a tiny profit many, many, many times. There are all sorts of solutions: but it turns out there's a simpler one that involves physics.

    Thanks to Ronan and all the team at IEX - you can find out more about them here: https://iextrading.com/ or on Twitter at https://twitter.com/IEX

    I fact-checked Ronan's claim about the SEC white paper because it seemed a bit too good to be true, but he's right: see Hu, E. (2018). Intentional Access Delays, Market Quality, and Price Discovery: Evidence from IEX Becoming an Exchange. SSRN Electronic Journal. https://www.sec.gov/files/07feb18_hu_iex_becoming_an_exchange.pdf [PDF]

    Edited by Michelle Martin (@mrsmmartin)

    I'm at http://tomscott.com
    on Twitter at http://twitter.com/tomscott
    on Facebook at http://facebook.com/tomscott
    and on Instagram as tomscottgo
  • Runtime : 4:39
  • tom scott tomscott things you might not know iex iex trading high frequency trading stock exchange

COMMENTS: 40

  • Tom Scott
    Tom Scott   1 years ago

    Apologies for the patchy video quality in places here: my camera really did not like the lighting inside IEX's offices. And to be clear, this isn't sponsored, I just found out about the cable loops and emailed IEX to ask if I could film with them!

  • Rishab Jain
    Rishab Jain   1 weeks ago

    Knowledge should be updated faster than stock market then one can make money.

  • CHEE- RIOS
    CHEE- RIOS   1 weeks ago

    Oh no! Watch out tom! Here comes bane!

  • Josh Page
    Josh Page   1 weeks ago

    Why did I read the title as: "Slowing down a stock engine with 36 miles of cable"?

  • Thomas krieken van der

    i just saw this. this s a super idea!! this elliminates the trading with frint knowledge whichch is illegal!!! They should implement this on all trade markets!!!

  • Ahmed Bouhraoua
    Ahmed Bouhraoua   1 weeks ago

    My dad is an engineer that works on chips that are used for high frequency trading. I learned a lot about this as a kid.

  • D1agram
    D1agram   1 weeks ago

    Waiting for quantum computing/AI to make all of this worthless.. money, stocks, work.. everything

  • aguy ishappy
    aguy ishappy   2 weeks ago

    I swear that's the stock exchange from the dark Knight rises

  • DiZh0
    DiZh0   2 weeks ago

    But why use 38miles of fiber optic? You want to slow it down but use the fastest cable there is which is also expensive. Why not a cheaper cable and less distance?

  • Bill T
    Bill T   3 weeks ago

    Somehow this came up in a search for bat soup recipes.

  • Timmy B
    Timmy B   3 weeks ago

    Is this why downloads go SUPER fast but take FOREVER for the final little bit? /s

  • Just Looking
    Just Looking   3 weeks ago

    My problem with high frequency trading is this: it completely decouples stocks original purpose as an investment means to capitalize a company. The price of stock has next to nothing to do with whether a company is even producing anything or not.

  • randy osborne
    randy osborne   3 weeks ago

    What's the difference between HFT and wire fraud or wire tapping?

  • Mustafa Ehtesham
    Mustafa Ehtesham   3 weeks ago

    Billionaire: invests millions into sophisticated equipment to make him moneyGuy with a long wire: I am about to end this mans whole career

  • macforme
    macforme   3 weeks ago

    Sorry, I have a lag cable in my brain.... so IEX has a lag of microseconds but all the other exchanges do not.... how are they competitive?

  • Ben W
    Ben W   3 weeks ago

    Sad, it’s like crackheads sifting thru the carpet for a fix.

  • Posi P
    Posi P   3 weeks ago

    Good thing we don't use miles of cables. We use fiber.

  • blindedby2monkeys
    blindedby2monkeys   4 weeks ago

    1 micro second is 1 millionth of a second. Which, 37 miles of cable only slows it down by 350 microseconds. Barely any difference.

  • Arron
    Arron   1 months ago

    I have no idea what any of this means

  • Phil Pinto
    Phil Pinto   1 months ago

    Is it me or does $27,000 seem quite a lot of money for three roles of fibre optic cable. ?

  • moviestudioland
    moviestudioland   1 months ago

    HFT just like Bit Coin Mining engines is a waste of electrical energy and pollutes the earth with green house gasses. Now that they are at a stalemate the SEC should outlaw HFT. It is complete BS.

  • sebastep
    sebastep   1 months ago

    Remember when the stock market was a way for ideas to find capital and vice versa? Pepperidge farm remembers.

  • Paul Short
    Paul Short   1 months ago

    Great video. Really enjoyed it. Such a simple idea to help solve a complex problem

  • Robert M Kreegier
    Robert M Kreegier   1 months ago

    I think HFT should be abolished. For a market to accurately reflect market forces and allow the power of supply and demand to rein, every trader must be on equal footing. That means all trading must run at the rate of the slowest traders.I think what stock exchanges should do is set up scheduled times that trades become recorded. Since the slowest traders are humans taking in data and making choices, I think it would be reasonable to have an hourly schedule. So, at the top of every hour, all trades are finalized and recorded, with the information of those trades released on the next hour along with prices. That means all trades are kept secret for an hour.Not only does this give a chance for humans to trade on equal footing with computers, but it fundamentally slows the market down and smooths out volatility. It allows the market to more accurately reflect real market forces.

  • Zizka Zenit
    Zizka Zenit   1 months ago

    This should all definitely be legal /s

  • A Wolff
    A Wolff   1 months ago

    if someone could explain this to me I would be for everly grateful

  • UltraFagBot101
    UltraFagBot101   1 months ago

    Wouldn't you want to use copper wire as electronic signals travel less than the speed of light in wire, and it's cheaper?

  • krixikraxi
    krixikraxi   1 months ago

    imho the stock exchange represents everything whats wrong in the world (well obviously not everything) making money while buying air and sell it with some profit seems like a stupid idea. and dont get me started on exchanging food from the third world via this system.

  • Aviator Andrew
    Aviator Andrew   1 months ago

    Why waste 27k on fiber optic cable when you could pay a software developer a fraction of that to write some code that could do the exact same thing...

  • R EMcW
    R EMcW   1 months ago

    reminds me of mw3 campaign

  • Computrix
    Computrix   1 months ago

    2020: "Slowing down the stock market with 38 Corona cases"

  • osbodav
    osbodav   1 months ago

    Finds random fishing line on the street and cuts them.