The most important rules governing high-speed electronic trading weren’t written by market regulators, New York’s attorney general or a computer whiz. They were formulated a century ago when Albert Einstein figured out nothing could travel faster than light. High-frequency traders, seeking to exploit money-making opportunities first, are moving information at velocities approaching Einstein’s barrier. The competition has become so extreme that earlier this month one vendor published a press release to boast it had shaved 12 millionths of a second off the transmission time between New Jersey and Illinois.
Caught up in a race that must end in a tie, firms that buy and sell securities in seconds while jumping across trading venues and assets are looking into new strategies that actually involve slowing down. The laws of physics are running into the laws of the state of New York, where Attorney General Eric Schneiderman said this week he wants to rein in the fastest traders. “No one’s messing with Einstein,” Ari Rubenstein, chief executive officer of Global Trading Systems LLC, said in an interview on Feb. 28, before Schneiderman’s probe was announced. “Our absolute speeds might be increasing, but our relative speeds are approximately the same. Investments right now in technology are more about detente than arms race.”