Milliseconds Matter

Flash Boys has been on my to-read list for a while. I’d seen it referenced in passing as if everyone had read it. Michael Lewis writes about high frequency trading and the start of IEX.

I finally bought it after listening to the Joe Rogan podcast where he had on Andreas Antonopoulos who uses Bitcoin exclusively. Rogan mentioned the importance of physical location to fiber lines. That sounded like  a reference to high frequency trading. In the same week, IEX was finishing up their transition to an exchange.

I knew little about finance prior to reading Flash Boys. Now I have a better idea of how little I know. A lot more happens than people might think when they submit a trade online.

The importance of milliseconds
How long is a millisecond? Michael Lewis explains a lot of technical things in simpler terms. There are a lot of metaphors.

Lewis describes Brad and Ronan on their campaign to bring awareness to high frequency trading:

They never created a PowerPoint; they never did anything more formal than sit down and tell people everything they knew in plain English.

Lewis may as well be describing himself. I have no financial background but now understand the basics of high frequency trading. Humans aren’t great at thinking of numbers at scale, but Lewis does a great job describing tiny numbers in sensible ways:

…from Chicago to New York and back in roughly 12 milliseconds, or roughly a tenth of the time it takes you to blink your eyes, if you blink as fast as you can.

I played Counter-Strike in high school. LAN parties and all. And one of the things that LAN parties took away was latency. When we were on the server my friends played on, ping varied around 70ms (DSL) to 250ms (usually on a 56K modem, virtual god help the virtual you). Everyone begged their parents for DSL lines. Milliseconds mattered.

Milliseconds, microseconds, either one may as well be instant. Even seconds seems fast enough for a lot of things. What difference does it make?

There were one million microseconds in a second. It was as if, back in the 1920s, the only stock market data available was a crude aggregation of all trades made during the decade.

I like this stretching out of time to describe resolution. It reminds me of zooming in on the timeline in a video editor from 1 minute to 1 second.

Never before in human history have people gone to so much trouble and spent so much money to gain so little speed. “People were measuring the length of their cables to the foot inside the exchanges. People were buying these servers and chucking them out six months later. For microseconds.”