Nanex Research

More HFT Hyperbole

On page 48 in the May 2012 issue of Futures Magazine, Steve Zwick's excellent article "Is high-frequency trading too fast for our own good?" contains a quote from a High Frequency Trading (HFT) proponent. In an attempt to downplay the more than 10-fold increase in cost that HFT has imposed on everyone processing basic stock quote data, Daryan Dehghanpisheh states :

I can chuckle when I hear traders talk about the overwhelming two billion messages a day, because Google, Facebook and Flickr are handling five billion posts a second.

What Mr. Dehghanpisheh fails to recognize is that only Google itself has to process data at that rate, not each Google user. Or does he think every one of the millions of stock quote data subscribers must have the engineering horsepower equivalent (people, computers, software) of Google? Given that he's a sales guy at Intel, who benefits from selling high-tech horsepower to Wall Street, we'd expect him to try to get people to buy more hardware; but enough to match Google? Is there even enough hardware and engineering talent in the world to build several million Googles? As of January 2012, Google is estimated to have 1,791,040 servers and about 33,000 employees. We don't think many people have an extra billion dollars lying around to buy all those servers. Just 200,000 Google equivalents would employ every man, woman and child on planet earth.

Mr. Dehghanpisheh also fails to recognize that users don't expect Google to return search results within 50 milliseconds - now considered an eternity by Wall Street standards. And as far as we know, no Facebook user has ever lost money from waiting a full second to see an update on their wall. Kind of scary to hear someone (who should know better) equate delivery of Facebook status updates with critical financial data.

Finally, let's look at the numbers he mentions. A quick search on the internet reveals an incredibly wide disparity from the five billion posts a second number quoted. For example, according to the numbers here, there are only about 300,000 update posts to Facebook each minute, which works out to 5,000 a second. This page tells us Google handles just 34,000 queries (posts) per second. We are pretty sure that 34,000 is not even close to the 5,000,000,000 number quoted by Mr. Dehghanpisheh. In fact, this disparity may set a record in marketing hyperbole.

Sadly, this is typical of the nonsense propaganda put out by the pro-HFT camp. Seeing how major financial media willingly print these ridiculous claims, we have to wonder: do people really believe these guys?

Nanex Research