My opinion on Wall Street’s implementation of HFT is no secret to OmniNerds. A proof of concept hack has been demonstrated against HFT systems that is being dubbed a side-channel attack. The principle is very simple, and similar in practice to DoS, where an attacker introduces minor latencies into the network – not enough to disrupt it – to delay a trade’s execution by milliseconds. That creates a large enough window to squeeze in a competitive trade or one that negatively influences the value against which the delayed trade made its execution decision. It would be a virtually impossible vector to detect as the very essence of HFT is to be faster than the other guy making the injected trade seem like just another HFT system at play. Furthermore, the delays are so inconsequential and dispersed that efforts to actually detect them probably costs more than the affected loss. But to the criminal, those random pay-offs are easily worth it.
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