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Using Supercomputers to Regulate High-Frequency Trading

Researchers are using supercomputers to understand how high-frequency computer trading is changing Wall Street. At the University of Illinois, assistant professor of finance Mao Ye and Chen Yao and Jiading Gai used supercomputing resources made available through the National Science Foundation’s XSEDE program. Launched in July 2011, the program supports research in areas not traditionally involved with HPC.

Fifteen years ago, trade was done by humans,” says Ye, “and you didn’t need supercomputing to understand and regulate the markets. Now the players in the trading game are superfast computers. To study them you need the same power. The size of trading data has increased exponentially, and the raw data of a day can be as large as ten gigabytes.”

This problem was highlighted by the “flash crash” of May 6, 2010. In the biggest one-day drop in its history, the Dow Jones Industrial Average fell nearly 1,000 points — 9 percent of its value — in about 20 minutes. Analysis eventually revealed HFT-related glitches as the culprit, but it took the SEC months, notes Ye, to analyze the data and arrive at answers. Read the Full Story.

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