Chapter 79: Monopoly Exchange

  The ultimate goal of businessmen is to pursue profit.

  This is most evident in high-frequency trading.

  Each supercomputer or mainframe has a pre-set arbitrage strategy. How much price difference to prioritize buying, how large a fluctuation to choose entry and exit, most importantly, there is also a stop-loss order, which is set by investment institutions to place uncontrollable losses.

  Once it falls below this line, the computer will immediately sell out the warehouse receipts, ensuring that losses are within a certain range.

  Although arbitrage strategies vary greatly, one major principle remains unchanged. That is to pursue maximum profit and minimize risk as much as possible.

  Specifically in high-frequency trading, it is to be the first to discover two orders with a large price difference and complete the entry and exit process in an instant.

  Merrill Lynch's investment arm did the same thing.

  However, when various investment institutions are all staring at the same exchange, conflicts inevitably occur.

  Whoever discovers it first and completes the arbitrage transaction naturally becomes the most important thing.

  In 2003, high-frequency trading was still in its developmental stages and had not yet reached the era of full competition, as markets were so large and the number of high-frequency traders was so small, limited by the still underdeveloped computer hardware and systems, competition was carried out in a gentle, quiet manner.

  Whoever calculates faster, whoever transmits faster, whoever grabs the order first, it belongs to him.

  In the past few months, Merrill Lynch's investment department, which is new to this field, has not encountered too strong opponents. They sometimes lose some opportunities, but overall are satisfactory.

  So Minister Mr. would lead Catherine and others to see the latest technology, Wall Street's recognized future development direction.

  Who would have thought that in just a few minutes, three large computers worth nearly ten million US dollars would malfunction one after another.

  Apart from a small amount of white singles transactions, blue singles are almost scarce.

  Most of them are orange.

  The whole screen is orange, like a big orange that's leaking juice.

  The minister didn't even have time to wipe the sweat, he plopped himself down in his own seat and began reviewing the transaction records. The more he looked, the more shocked he became, and the constantly increasing list made him anxious and flustered.

  Catherine followed him into the office and asked: "If there's no deal, then there's no deal. What's the big deal?"

  "High-frequency trading is all about the number of transactions." The minister was too busy to speak, and after a long while, he said: "Every time, they are one step ahead of us, buying up the profitable orders. If this continues, we will definitely be crushed by them."

  This is also the only way for high-frequency traders to compete at present.

  It's just that in the past, no high-frequency trader has ever been so fast.

  "Is that trader so useless?" Catherine was referring to the Georgian she valued.

  "It's not his problem." The minister said, muttering to himself: "It shouldn't be like this."

  "What's wrong?"

  "Their reaction time is too fast, and it's not the order-taking time that's fast. I checked the NYSE's co-location service providers, and they're not on the list... It looks more like their analysis speed is fast - what a great computer..."

  "Maybe it's just their software strategy is better?"

  The minister suddenly became spirited and thought that Catherine also had times when she didn't look for trouble, asking: "What did you say?"

  "I'm not quite sure, but I think that if computers are so expensive, then with a good strategy, you could cheat and monopolize the business... maybe it's just a few geniuses' idea..."

  Ma Ke actually doesn't completely not understand computers like he appears to be.

  In fact, he had studied finance in Germany for two years before being dispatched to the United States to complete the Vatican's layout on the financial market.

  So he made some suggestions, but couldn't say too much.

  The minister looked somewhat disappointed and turned back to the screen.

  Mark, however, was quite confident in his own judgment, pretending to go to the bathroom, and secretly inquired about it from the Vatican.

  For the people on earth, Wall Street affects everyone. Even in remote and impoverished mountainous areas, villagers who have never left their county are exploited by them, let alone large religious organizations.

  The numbers on the screen were still refreshing.

  Just like Jin Yuan International's account.

  The orange proportion gradually expands until it covers all colors on the screen.

  The minister made an instant decision and abandoned the path: "Withdraw from NYSE, now."

  "We still have 270,000 orders that haven't been executed." The trader suddenly shouted. Since the orange screen, some of their originally stable arbitrage orders had also been stuck in their hands due to being preempted by the other side.

  This is simply the most terrible disaster for high-frequency traders.

  "Stop loss." The minister said and sat down on the chair with a plop.

  At least five minutes later, he let out a "hiss" and smiled bitterly: "Catherine, you've seen us make fools of ourselves. Today we've probably lost at least $5 million."

  The loss is so small, thanks to the low risk of high-frequency trading. Unless the market makes an irrational fluctuation, it will naturally bring low risk per trade due to its low profit per trade.

  The minister, who has been struggling on Wall Street for many years, quickly adjusted his mood despite being at a loss. Compared to the losses, the decision to delist from the NYSE is even more significant, and I'm afraid that tomorrow's board meeting will have corresponding questions raised.

  Catherine was surprised and comforted with a smile: "You make so much money for the company every year, it's normal to have a little accident."

  He talks pretty, and in his mind, he indeed doesn't take $5 million to heart, just the price of a yacht.

  The minister seemed to have regained his strength, nodding heavily: "A single sheet of paper, holding it for more than 15 seconds would pose a huge risk. Market opportunities are fleeting, and arbitrage opportunities are no exception."

  He tapped on the screen with the name of Jin Yuan International and said, "They are going to swallow up the NYSE."

  "Have you finished eating?"

  "At their speed, they can probably do 10 trades per second now." The minister shook his head and smiled, saying: "I think they are specializing in NYSE, as long as they maintain today's state without mistakes, we will all be orange."

  "Does the exchange care?"

  "Look. Those politicians, we can't wait any longer tomorrow." The minister said and roared: "Do NASDAQ today, Tom goes to talk with Chicago, we enter tomorrow."

  Traders continued to be busy.

  The minister stared at the computer screen, occasionally referring to something.

  Ma Ke inadvertently walked behind him and saw that the content inside was indeed Jin Yuan International.

  High-frequency traders are not mysterious figures, and they have corresponding filings within the exchanges, as well as varying amounts of information. Banks collect more comprehensive information, which may even include a company's daily financial situation, but this information is difficult to obtain.

  Although in the eyes of most Chinese people, if you can earn $1 million every day, you would probably hide on Mars to avoid being discovered. But on Wall Street, there are many traders who earn $1 million every day, not to mention bosses and institutions.

  Those math geniuses who graduated from Yale and MIT, looking silly like ordinary retards, but the various financial derivatives they invent every year bring considerable profits to the entire market, of course, also bringing themselves tens of millions of dollars in salary returns.

  In this world built with gold, information is both the most valuable and worthless thing.

  About 10 minutes later, the Georgia boy shouted loudly: "Sir, the trading strategy has changed again, prioritizing NASDAQ, lowering NYSE by 6 priorities, switching in 10 seconds, 9 seconds, 8 seconds..."

  "Let me take a look." The minister closed the page of Jin Yuan International, closed his eyes to calm down for a moment, and then continued to read the newly revised trading strategy.

  "Seven seconds, six seconds..." The Georgian boys were still counting down, and in a situation where every second counted, they wouldn't waste any time unless they received an explicit order to stop.

  The minister remained silent throughout.

  The countdown reached 0, and traders tensed up for a moment before relaxing again.

  Then it's about computers.

  What they need to do is make quick responses when things happen outside of the mathematical models on the computer. Like just now.

  The orange on the big screen was gradually brushed away, becoming less and less until it couldn't be seen anymore. Some beautiful blue began to appear, making everyone happy.

  Mark saw the minister's serious expression and couldn't help but ask: "Are you worried that they will also enter Nasdaq?"

  "They will definitely get in." The minister didn't have a bad feeling about it, nodding at the screen: "Their bank is Mellon National, 265 times leveraged, I estimate their own capital isn't too high, with the current rate of increase, hum."

  Ma Ke suddenly understood and asked: "How much do you estimate their total funds in the market?"

  Although he studied finance for two years, he is definitely no match for a veteran trader at Merrill Lynch.

  "Between 200 million and 1.5 billion." The minister gave a very broad figure due to the issue of fund utilization rate.

  But for them, the difference between 200 million and 1.5 billion is not significant. Calculated at a leverage of 265 times, it's only $7.5 million to $56 million.

  "Is it a newly established small company at home?"

  "That's not small at all. The supercomputers they use are worth tens of millions, maybe even hundreds of millions of dollars." The minister laughed like a little lobster, his disheveled hair waving in the air like claws.

  Hearing hundreds of millions of dollars, Mark's eyelid twitched.

  He glanced at Catherine, who was flirting with the Georgia boy, and said in a quick and light tone: "If they had $100 million, wouldn't they be able to sweep New York?"

  "That's enough for North America," said the minister, grabbing the phone. "Excuse me, I have to talk to those guys at Mellon Bank."

  As an investment bank, getting insider information is almost an open secret.

  Mark smiled and left, but his mind was a complete mess.

  A $100 million supercomputer and a $5.6 million principal, mixed together. He naturally came to the conclusion that there was no such thing as a $100 million supercomputer, but rather some small company had invented some special trading strategy, just like high-frequency trading was invented.

  If Jin Yuan International is a renowned investment bank, Mark might think that such trading strategies are only suitable for small capital operations.

  But in reality, he believes more in his own judgment.

  "I'll get it." Mark made up his mind at once, and in his view, this might be the greatest gain for him to be with Catherine.

  ……