Agreed, Jim, this is a fascinating discussion.
re: "HFT seems to be geographically dispersed. Is that because of specialization? For example, HFT in Chicago: [...] [...] one might think a central location would halve latencies to either side of the continent."
The condition that separates, or to a great degree limits, the handicap of geographic distance in the high-frequency trading model is the ability of 'any participant' to physically locate their servers within the territory of the market center of interest. This suffices for single trade executions, but I would imagine will become more convoluted in future when evolving forms of securities instruments require performing multiple calls to as many market center's feeds (ticker plants and normalized/equalized feeds within the colos of those market centers) for more elaborate forms of trading activities that are also time sensitive
Getting back to your original question concerning the distancing of brokerages to market centers, however, we discussed this dynamic last year in relation to a story about a Kansas City firm that upped and moved its servers to NY to be closer to the NYSE. To refresh:
"A tiny Kansas City start-up now handles 10 percent of all U.S. stock trades. How BATS took on Wall Street to shake up the financial establishment"
See: Message 25993519
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For the time being, at least, this is what distinguishes the challenges of online gaming from those faced by the HFT community. However, who is to say that the gamers themselves won't at some point come up with something comparable in future by placing online game execution servers closer to gaming sites, if that isn't already being done? Of course such a model would take the individual gamer out of the equation on a real-time, personal level, once the playing of the game was delegated to a server, but therein lies another entire set of opportunities to demonstrate programming skills as opposed to hand-eye response time and personal judgment capabilities under stress alone. Hm.. come to think of it, aren't these the same issues that face the HFT crowd today as well? ;)
FAC
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