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statarb, high-frequency and latency

Posted: June 3rd, 2008, 4:15 pm
by Siberian
trying to get a general feeling of how important this latency factor is for the high-frequency statarb guys. Reason for asking is that i have recently met with a unnamed but rather well established statarb fund who claims that PMs don't care about latency, in fact they do not have any servers at the exchange floors and could not care less about it alltogether, at the same time they have a very sophisticated t-cost model. Here are the questions:a) could it be that the marketing guy does not have a clue what he is talking aboutb) if that is indeed true, what's the downside of having servers at the exchange floor, my understanding is that it is not lavishly expensive, so why would you not want to do that, i.e. put your server very close to be able to execute with a minimal latency esp. if you are running a high-frequency shopAppreciate any thoughts.Ev

statarb, high-frequency and latency

Posted: June 4th, 2008, 9:26 pm
by DominicConnor
Some work is indeed not very sensitive to latency, some is, but everyone care about latency to some degree.Thing is that "average" latency is not a very useful figure in this environment. It's fine for most trading floor work, but you need know the maximum time, and how often that occurs.So to an extent your marketing contact may not rally get what is going on. To be fair this stuff is very technical, I don't really understand it all.Co-location is relatively expensive but the "cost recovery" model used in many banks can make it look surprisingly affordable.Another reason for Co-lo is that you can run and use whatever shit you think will do the job, and not have to wade through the bureaucracy that your IT department may put in your way.

statarb, high-frequency and latency

Posted: June 4th, 2008, 9:33 pm
by Siberian
Thanks for the reply Dominic. I am still surprised that the high-frequency shop does not care about latency, if you are using tick signals and your average holding period is say in minutes, would you not want to trade immediately? I have met with other stat arb guys who use high-freq signals and they really worry about the latency, in fact they have servers on almost every exchange you can think of, and it seems to be the case with most of the hedge funds in a similar category, so i am trying to understand this discrepancy.