Attacking High-Frequency Trading Networks
Turns out you can make money by manipulating the network latency.
cPacket has developed a proof of concept showing that these side-channel attacks can be used to create tiny delays in the transmission of market data and trades. By manipulating specific trading activities by several microseconds, an attacker could gain unfair trading advantage. And because the operation occurs outside the range of monitoring technology, it would remain invisible. "We believe that such techniques pose a substantial risk of creating unfair trading, if used by the wrong people," Kay says.
It's hard to know how real this threat is. Certainly micro-traders pay attention to latency, and sometimes even place their computers physically close to exchanges so they can reduce latency. And while it would be illegal to deliberately manipulate someone else's trades, it is probably okay to place a gazillion trades at the same time which -- as a side effect -- increases latency for everyone else. My guess is that this isn't a movie-plot threat, and that traders are trying lots of things along this line to give them a small advantage over everyone else.
On the same subject, can anyone explain this?
Posted on January 12, 2011 at 6:59 AM • 59 Comments