How to slow down a stock exchange

Tom Scott explains how the IEX stock exchange uses a 38-mile coil of fiber-optic cable to introduce latency and counter high-frequency trading.

High-frequency traders have a few tactics on stock exchanges: but simply put, they gather price information faster than anyone else, sometimes even faster than the markets themselves, and use that to make a tiny profit many, many, many times. There are all sorts of solutions: but it turns out there's a simpler one that involves physics. Thanks to Ronan and all the team at IEX - you can find out more about them here: iextrading.com/ or on Twitter at twitter.com/IEX I fact-checked Ronan's claim about the SEC white paper because it seemed a bit too good to be true, but he's right: see Hu, E. (2018). Intentional Access Delays, Market Quality, and Price Discovery: Evidence from IEX Becoming an Exchange. SSRN Electronic Journal. sec.gov/files/07feb18_hu_iex_becoming_an_exchange.pdf [PDF] Edited by Michelle Martin youtube.com/@OnTheCrux 🟥 MORE FROM TOM: tomscott.com/ (you can find contact details and social links there too) ❓ LATERAL, free weekly podcast: lateralcast.com/ youtube.com/lateralcast/ 👥 THE TECHNICAL DIFFICULTIES: youtube.com/techdif