Friday, August 28, 2009

Citizens For Honest Markets Manifesto


Please ignore the Pcratio/lower part of this picture, see the second picture for PCratio update instead.

So, what does the FREE SPEACH AND HONEST MARKETS HAVE TO DO WITH EACH OTHER?
You Can Have Either/Both, As Long As You Are Rich!!!
Today we shall discuss a bit more technical aspects of trading systems and networks. Networks have been designed to support the reliability. Without such reliability Internet will be unusable for anything that looks like a transaction. For example, if one could not verify that the execution order has been received by the exchange computer, it would be very hard to proceed and do the next operation, whatever that maybe, perhaps CANCEL/REPLACE to fool the "other guy". So, in general, it takes the network basic protocols to carry the traffic and certify the delivery of the data on the most elementary level of the networks. This protocol is called TCPIP( Transmission Control Protocol for Internet). Now this basic protocol knows nothing and cares none about user traffic. It does not know about the user information such as FIX ( Financial Excuse Protocol) CANCEL command. This is similar to the railway car not knowing what is put on it to be carried ( Coal or Grains etc.) It just knows that the content must be delivered from one place to another. In the case of trading example that means delivering the message from brokers computer to exchange computer. In the collocation case, there is only one router between these two computers and that means very short time, but amazingly enough even that can be (ab)used to shorten the trading decision times. So the Goldman ( example) computer sends BUY command, Goldman's Computer encodes it into TCPIP protocol and sends it to ARCA(EXCHANGE) router. Routers do not care, as mentioned, about BUY, they just know the envelope (TCPIP) that BUY was encoded in and at the basic level they confirm the reception of the envelope. The BUY was not yet received by the Exchange Computer, but the envelope delivery was confirmed by the router to the Goldman computer. Now If Goldman Programmers were smart and had access to the underlying TCPIP stack of communications inside the operation system( say LINUX/WINDOWS) and intercept the fact of ACKnowledgement of the BUY being delivered to router, they can surmise that the BUY will very soon(milliseconds) will make it to the EXCHANGE computer. This is very reliable, therefore Goldman's trading platform may say, let us not wait before the EXCHANGE computer got the envelope from router and decoded the BUY message from the envelope and send an answer back to Goldman's Computer( via router and new TCPIP envelope of its own initiation). So, now, Goldman , can short circuit the time and send CANCEL/REPLACE order!!!
This simply means that Goldman's computer was able to place two FIX protocol commands ( BUY, CANCEL) in a manner that saved, at least, couple turnaround times for the higher level protocols. This is similar to sending somebody a letter via post office and assuming that they got it, therefore it is ok to send the next one , which is totally dependent on the context of the first one. Interesting ha? So, you ask why not send them together anyway? well this is not always possible or desirable. You may want the messages to be broken for security purposes or because the paper can not handle both messages together(: - ( you can always get more paper, but just assume that is the case with FIX protocol and it can not get two messages at once).
You see now the games people play to achieve absolute speeds of execution even when the broker computer is collocated with exchange computers. I can even imagine that there will be day when all this is hard coded into the HARDWARE and is executed at faster speed than it takes conventional computer/operating systems to delver messages between the programs and hardware that puts out the messages into the communications lines.
HUH! You see the technology? You can play a lots of expensive games if you have money!

46 comments:

xerxes said...

Good morning again Dear Boris...

boris said...

Good Morning Dear Xerxes

Good Trading Dear Friend

xerxes said...

The SPX seems to have bounced off 1035-6 level 3 times on the 15 minute chart this week...I'll be interested in seeing the emini today to see what you suggest may happen today, Dear Boris...It looks like a rising wedge on the 30 minute is unfolding so that level would need to fall....

xerxes said...

loonie hit the 5th already then bounced...that sucka really gets around dear boris :-)

xerxes said...

CAD Current Account (BoP) (Canadian dollar) (2Q)
CAD Industrial Product Price (MoM) (JUL)
CAD Raw Materials Price Index (MoM) (JUL)
USD Personal Income (JUL)
USD Personal Spending (JUL)
USD Personal Consumption Expenditure Deflator (YoY) (JUL)
USD Personal Consumption Expenditure Core (MoM) (JUL) USD Personal Consumption Expenditure Core (YoY) (JUL)
USD U. of Michigan Confidence

xerxes said...

Most of these released at 8:30am EST

xerxes said...

Some guy from BoA on Bloomberg says that the buck will soon not be viewed as TP....

boris said...

So, Dear Xerxes,
Is TP short for Truly Perfect?

(:-

GOod Trading Dear Xerxes

xerxes said...

Bernanke perfect Dear Boris :-)

Antidollar is gaining upward momentum in last 30 minutes Dear Boris...feels like the buck could get really crushed come 8:30am if the numbers are right

boris said...

Dear Xerxes,
That is yesterday's news.
All you have to do to realise that is to look at the chart below about EUROProjection and reality.

It has one day extra , that is today, free for those who could "SEE" it yesterday.
(:-


How about subliminal messages Dear Xerxes,
I seem to be sending them all the time.

Those that did not read this blog yesterday, just missed it!
Sorry!

(:-

There is always tomorrow

Good Trading Dear Xerxes

xerxes said...

I read everything every day Dear Boris...I don't have any idea what you're talking about :-)

boris said...

Good For you Dear Xerxes,
Less knowlege less worries(:-

Good Trading Dear Xerxes

xerxes said...

Gold went wild but eurusd yawned at the data release.....

John said...

Boris

good morning

old john

John said...

Boris

good morning

old john

boris said...

Dear JOhn,
Good morning and
GOod Trading My Very Dear Friend

boris said...

Dear Subscriber,
EMINI157 on the DotNet

xerxes said...

All data is released for the day...Now the only thing left for GS to trade off of, Dear Boris, is the emini157 :-)

xerxes said...

Even I, Dear Boris, know that one should have a stop loss :-)

Aug. 28 (Bloomberg) -- Norges Bank Investment Management, which oversees Europe’s largest sovereign wealth fund, named a new team of executives after record losses last year wiped out gains from 12 years of investing Norway’s oil and gas revenue.

waldo said...

Hi all, an email from Bob Preckter went out to all his subscribers this morning that he went 100% short at the open. Got this from another blog. waldo.

jimww said...

Dear all Bob p was in T bills from 1987 to 2007. He has had a hot hand recently...... take him with a large grain of salt.

John said...

jimww

I take everyone except Boris with a grain of salt.

stay small and stay in business

another bus is on its way

old john

boris said...

Dear Waldo, Dear Frirend
Thanks for information
Dear Jim Thanks Dear Friend
Dear John, thanks a lot very Dear Friend

Please see Todays, preopen chart send to subscribers.

YOu be the judge.
Yes, Bob Precter had a hot hand lately. I doubt hotter than us.
Just see the Public records on this page.

Nevetheless, I would not take lightly Dear Bob's advice.

If 1015 is broken down today that end has come. Meanwhile I stick with what is on the picture

Good Trading Dear Readers

boris said...

Please see the picture posted on the BODY of this post, you are now reading the comments section only

GOod Trading

boris said...

This fifth on the picture may turn out to be another Beethoven's fifth, but I do nto know at this moment. Likelyhood, I would say is not even 50/50 that this is a high. As indicated if we break down below 1015, I will then consider this to have been the top with a probability higher than 50/50

Actually for my own intraday play I bought the market around 1022. And have a stop in the market. Subscribers, could have done exactly the same, by looking at the EMINI157 graph before market open

Good Trading Dear Readers

boris said...

My stop by the way, is at 1022.75 and indeed the drop below 1016 would be a cardinal break in the market that will not 100% signal the top, but perhaps the echo top at least. Echo top means that we may get closer to that level again.

Dear Subscribers, looking at our SECTORS picture , you will notice that more and more sectors have reached close to their next heavy resistence points.

I was most concentrated on XLF hidden AP confluence with normal YEALY APs

Please look at your charts to see that level, we approached it today very close. Please refresh on that number. Finantials have lead the last rally and they will stop it, in my humble opinion.

Good Trading Dear Readers

jimww said...

Dear boris Ya, you are better trader than Bob P any day. I could be way off base but in my thinking the gap at 1005 is my line in the sand for trouble, and I think this trouble comes after Oct, option expiration but I am just guessing at this point in time. Stay healthy my friend the world needs more of you.

jimww said...

Dear Boris Oh one other thing , I sent a fellow from slope of hope looking for forex tradeing to you I hope he signs up. I always put in a good word around the web for you.

boris said...

Dear Jim,
I appreciate, the comparison. I guess nobody can avoid it in this business. As I said, I would just defer people to the front page of this site.

Please note 1029-30 will play the pivotal role again and could stop this rebound.

CAREFUL please

Good Trading

boris said...

I am taking small profit here in my position at 1029

boris said...

Never got there,
Forced to get out 1027

boris said...

Subscribers, will notice that this 1029 was the same number that was so important when market was coming down from early OPEN, now it stopped the market from going above it. If market can break that level, it can escape further damage

Good Trding All

boris said...

Dear Jim,
Thank you very much, Dear Friend

Very Good Trading to you Der Jim

boris said...

Actually,
Dear Readers,
Looks like what we told our subscribers this morning trnapired with 100% precision, with the conditions attached , of course.

See picture and conditions in the body of this post.

Have a nice weekend Dear Subscribers, Readers

xerxes said...

Dear Boris...On Friday the feds said that there was a slight increase in income...Take a look at this Treasury chart....

http://www.ritholtz.com/blog/wp-content/uploads/2009/08/tres-chart.png

...Who's the shakran?

boris said...

Remember Dear Xerxes,
Income is not taxed( most of it anyway(:- ) , especially low wager earners.

SO, there may not be lier here(:-

Good Trading

xerxes said...

good morning dear boris

xerxes said...

Whodathunk?

Aug. 31 (Bloomberg) -- The Federal Reserve will be unable to prevent the Trillions of Dollars in Government Stimulus pumped into the U.S. economy from stoking Inflation later this decade, a survey of business economists showed.

xerxes said...

Andy Xie says that after 20 years, China has still not transformed itself into a consumer based economy, that it is still all about exports, and if USA consumers don't start spending, China is cooked....

xerxes said...

Nice H&S on cable daily targeting 50% retrace...Who's gonna cut the cable Dear Boris :-)

xerxes said...

Apparently they don't need no stinkin' commodities no more Dear Boris :-) Gold dropped 10 bucks this past hour

xerxes said...

s&p 500 down around 1015

xerxes said...

EURUSD managed to reach 2nd daily despite shares down 1%

xerxes said...

WTIC approaching 5% loss Dear Boris

xerxes said...

Good Morning Dear Boris

xerxes said...

amazing that natgas is under 3