Would you have thought the future of trading lies in gaming titles like Grand Theft Auto?
That’s not, by the way, because the title teaches bankers street-smart dealmaking skills.
Rather, it’s because advances in the video gaming industry as a whole have been behind the industry’s foray into high frequency trading and so-called ‘latency arbitrage’ — the ability to trade at lightening fast speed.
It’s developments in Silicon valley that are consequently determining the pace at which financial firms are turning to algorithmic strategies.
In an interview with Securities Industry News Carl Carrie, the former global head of algorithmic products and high frequency market-making at JP Morgan, makes the point that co-location of servers with matching engines is not where it’s at all.
As he states:
“The most engineering ingenuity,” he said, “is being embedded in silicon.”
And that silicon is not general purpose processors, used for basic office tasks. Rather, they are field-programmable gate arrays, used widely in the video game industry to process rapidly changing graphics, action, sound — and player instructions.
In fact, gaming graphics processor producer Nvidia is now one of the main makers of microprocessors for the high frequency trading industry, according to Carrie.
Other big players are Pico Computing, Xilinx and XtremeData, Carrie said. They are producing complex processors that help securities firms make Value at Risk calculations and pull in huge amounts of market data from feed handlers, to support decision-making. “Typical processors running (programs written in) Java or C++ (can’t) run at the same speed,” he said.
As the also article points out, the video game industry is currently a $21bn business in the United States and twice that worldwide.
Which makes us wonder: if it’s advances in video gaming that are currently subsidising high frequency trading, just imagine the sort of video games we’ll get when high frequency trading begins subsidising the gaming industry.
Or perhaps it’s already happening?
Project Natal – Wikipedia
A gold rush moment for HFT – FT Alphaville
Where fantasy finance meets the real world - FT Alphaville
When equities are not enough, HFT turns to FX and futures - FT Alphaville