How Fast Is Too Fast?

800px-High-speedThere was a time when brokers traded stocks for investors. Such activity relied upon a human element to make calculated decisions to buy and sell in the frenzied atmosphere found on the stock market floor.

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However, those days are long gone. Much of today’s stock trading is no longer based on human decisions but those of computers which set in motion the buying and selling of millions of stocks based on algorithmic formulas. These trades now take place at unimaginable speeds.

Beginning in the early 2000’s, trading could be done in milliseconds or thousandths of a second. This represents two hundred times the average speed of human thought. By 2010, the time needed to trade was shortened to microseconds—one-millionth of a second.

Now, the unit of measure is the nanosecond, or one-billionths of a second. Subscription5.1Writer Mark C. Taylor reports that, “In 2011, NASDAQ released its NanoSpeed Market Data Mesh system, which enables its clients to receive data in six hundred nanosecond, that is, six hundred billionths (600/1,000,000,000) of a second” (Mark C. Taylor, Speed Limits: Where Time Went and Why We Have So Little Left, Yale University Press, New Haven, 2014, p. 239).