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HindustanTimes Fri,18 Apr 2014

Tech power: the new speed of money shapes international markets

Graham Bowley  New Jersey, January 02, 2011
First Published: 22:13 IST(2/1/2011) | Last Updated: 22:15 IST(2/1/2011)

A substantial part of all stock trading in the US takes place in a warehouse in a nondescript business park just off the New Jersey Turnpike.

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Few humans are present in this technological sanctum, known as New York Four. Instead, the building, nearly the size of three football fields, is filled with long avenues of computer servers illuminated by energy-efficient blue phosphorescent light.

Countless metal cages contain racks of computers that perform all kinds of trades for Wall Street banks, hedge funds, brokerage firms and other institutions. And within just one of these cages - a tight space measuring 40 feet by 45 feet and festooned with blue and white wires - is an array of servers that together form the mechanized heart of one of the top four stock exchanges in the US.

The exchange is called Direct Edge, hardly a household name. But as the lights pulse on its servers, you can almost see the holdings in your 401(k) zip by.

“This,” says Steven Bonanno, chief technology officer of the exchange, “is where everyone does their magic.”

In many of the world's markets, nearly all stock trading is now conducted by computers talking to other computers at high speeds. As the machines have taken over, trading has been migrating from raucous, populated trading floors like those of the New York Stock Exchange to dozens of separate, rival electronic exchanges.

While this “Tron” landscape is dominated by the titans of Wall Street, it affects nearly everyone who owns shares of stock or mutual funds, or who has a stake in a pension fund or works for a public company. For better or for worse, part of your wealth, your livelihood, is throbbing through these wires.

The advantages of this new technological order are clear. Trading costs have plummeted, and anyone can buy stocks from anywhere in seconds with the simple click of a mouse or a tap on a smartphone’s screen.

But some experts wonder whether the technology is getting dangerously out of control. Even apart from the huge amounts of energy the megacomputers consume, and the dangers of putting so much of the economy's plumbing in one place, they wonder whether the new world is a fairer one — and whether traders with access to the fastest machines win at the expense of ordinary investors. The New York Times

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