JamulBlog

Cheating traders and c.  Here's a fascinating story straight out of the world of electronic trading (stocks, bonds, options) that I used to work in.  The starting point is the suspicion that certain traders in Chicago had knowledge of the recent Fed's decision to not start tapering down their monthly “quantitative easing” (aka wantonly spending our money).  The proof comes from c: the standard symbol for the speed of light.  The Chicago traders were making trades obviously based on knowledge of the Fed's decision before they should have known about it.  We're talking about milliseconds (thousandths of a second) here, but in the world of electronic trading, that can be worth billions of dollars.  The Fed's decision was published in Washington, D.C., and that information should have taken about 7 milliseconds to get to Chicago.  But the Chicago traders were acting on that information just 2 milliseconds after publication.  Light doesn't travel that quickly – so the inescapable conclusion is that (a) the Chicago traders knew about the Fed's decision ahead of time, and (b) they acted on it in a way designed to hide their prior knowledge (by waiting until the publication time to act on it).  But they forgot to include the speed of light in their calculations...