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   9 months 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!

  • Jacob Sowers
    Jacob Sowers   1 days ago

    Not gonna lie I clicked because I thought it said stock engine

  • UnkleRiceYo
    UnkleRiceYo   2 days ago

    Watched this when it came out, I’m now reading Flash Boys by Michael Lewis, and realised I’d seen your video on it already!!

  • Chad Punte
    Chad Punte   2 days ago

    seems foolish to not simply have a queue system. orders are set up in a queue that processes all orders systematically every 5 seconds or so.

  • a b
    a b   1 weeks ago

    lmfao I got a Jason bond ad at the start of the video

  • MrEricSir
    MrEricSir   3 weeks ago

    Reminds me of a certain episode of "Elementary" where Sherlock discovers a black box installed to give a stock trader's competition an unfair disadvantage.

  • Miles R
    Miles R   1 months ago

    I'm more interested in what those birds at 0:43 are doing than the entire rest of the video.

  • tirimut
    tirimut   1 months ago

    What a pointless business this is...

  • therasco400
    therasco400   1 months ago

    I honestly hate the idea of stock exchanges. To me unless you have a active roll in the management or development of a company you should not be able to receive profits from it. The system we have means no matter what a vast majority of people will never be able to rise above the poverty line because the people with money simply buy the profits from others labor. Compounding interest is evil.

  • SuperVstech
    SuperVstech   1 months ago

    2:04 frame skip... his secret got edited out. Illuminati confirmed...

  • Mattia Murianni
    Mattia Murianni   1 months ago

    how can the computer see someone's request to sell before the exchange could?

  • clray123
    clray123   1 months ago

    If you are a tree in a forest and want more light, one solution is to grow higher than the other trees.Another solution is to stop the other trees from growing higher than you.If only humanity could understand this simple lesson.

  • ceruchi
    ceruchi   1 months ago

    I love this. It's totally nuts that in the 21st century the literal speed of light is the only obstacle to financial transactions.

  • 213423 134242
    213423 134242   1 months ago

    That's until one night someone bribes a some minimum wage staff to bridge the entrance and exit point for £20.

  • Dan Schwartz
    Dan Schwartz   1 months ago

    Good for them. People trying to get advantages of microseconds in order to make short-term profits buying and selling stock defeats the real purpose of stock exchanges. I'd like to see a rule that forbids buying and then selling a stock on the same calendar day. But I know that's not going to happen. This is at least a start, I think.

  • Dominic Arlin
    Dominic Arlin   2 months ago

    For the confused people on how this works. Now everyone can prey on everyone more "fairly" now on this exchange.

  • Eric
    Eric   2 months ago

    S T O N K S

  • bioLarzen
    bioLarzen   2 months ago

    "There's a lot to be said about a solution thjat just uses physics."like... computers? ;)

  • Connor Downing
    Connor Downing   2 months ago

    This sounds exactly like a scam. Monitoring for a trade just so you can beat it by a nanosecond automatically? Or skimming pennies off of trades that you put yourself in the middle. This are just avant-garde scams that have no laws to ban them. How does this help anyone apart from getting in the middle of trades and taking money for no reason or help to anyone. high frequency trading is absolute bollocks

  • Alex MacLean
    Alex MacLean   2 months ago

    I knew trading was intense, but billions of dollars for milliseconds... Amazing.Would it not work to simply introduce a limit on trades? If you buy this stock, like a minimum hold time of however many minutes or hours?

  • Gravity Zero
    Gravity Zero   2 months ago

    There’s a lot to be said about a solution that just uses physics. Great quote

  • Michael Snyder
    Michael Snyder   2 months ago

    Flash Boys by Michael Lewis is a great introduction to high frequency trading.

  • NaaffaX
    NaaffaX   2 months ago

    They could have just delayed the signals from software side instead of installing miles of fiber cables!

  • Jordan
    Jordan   2 months ago

    This is stupid.. all they've changed is that they can't sell precious "close to the server" rackspace, instead, whatever area is closest to the other side of the cable becomes that space.. but they don't own it and can't profit from it. Everyone who is interacting with the exchange is still playing similar games.

  • Samuele Baggio
    Samuele Baggio   2 months ago

    A rather complex solution. IMHO.Just put a 0.001$ tax on each transaction.Human traders would pay a negligeable sum.Automated transactions would pay big dollars (thus discouraging the practice of scalping delays).

  • Drew Rycerz
    Drew Rycerz   2 months ago

    I moved closer to the stock exchange just to get my orders filled faster. Kinda funny.

  • Padisha's Den
    Padisha's Den   2 months ago

    Wow, I really did not expect a delay introduced with a longer fiber optic cable...

  • Eman M
    Eman M   2 months ago

    Isn’t the place where he’s stood the scene where batman was filmed?