High speed traders are racing to zero–the elimination of time to execute trades–with lasers. Investors depending on stop-losses may want to pay attention. With instant laser trading imagine how quickly a line will form when sellers want out of the market. Remember, just because a seller wants out at “X” dollars, it doesn’t mean there’s a matching buyer. The bid could be several dollars lower making the stop loss “peace of mind” useless. Read more on laser trading here in The WSJ:
In March, a small Chicago communications company plans to switch on an array of laser devices linking the New York Stock Exchange’s data center in Mahwah, N.J., with the Nasdaq data center in another New Jersey community, Carteret.
The lasers, perched atop high-rise apartment buildings, towers and office complexes along the 35-mile stretch between the communities, are the first phase of a grid intended to link nearly all U.S. stock exchanges this way, zipping market data and rapid-fire trades.
It is the latest salvo in the “race to zero,” traders’ term for their efforts to whittle away the difference between the speed their orders travel at and the speed of light. Zero, the point at which that difference would disappear, has become a kind of holy grail to computerized traders, for whom nanoseconds—billionths of a second—can spell the difference between profit and loss in their algorithm-driven trades.
