I come up with a nefarious plot — this time about a bunch of scammers who are trying to get themselves an information channel with lower latency than anyone else has access to, in order to run the mother of all forex front-running scams. (It's the same fake-Asian-Republic scam, but in this remix it's a shell game; what they're after are the rights-of-way to the played-out trans-continental gas pipelines that terminate in the 'stan in question, through which they intend to run dark fibre that will allow them to front-run the big currency transfers that daily travel between Europe and the Pacific Rim by way of undersea cables, which add precious milliseconds of latency as they skirt the edges of continents.)
And then this shows up in my blog-hoovering. Goldman-Sachs, the FBI, and a gigantic can of worms. Possibly there's nothing to it, but some of the more alarming speculation is treading so close to my plot that it's looking like Madoff 2.0. (Specifically: Goldman-Sachs run large chunks of the network backbone for the NYSE. Goldman-Sachs have an automated low-latency trading system. If they were Very Naughty People, which of course they aren't, they could conceivably do deep packet inspection on traffic over the NYSE backbone, look for big trades, throttle the IP packets while the trade was in progress, and get their own trades in a few milliseconds in advance — front-running, in other words, but on an heroic scale. But they wouldn't do that because they are investment bankers and as we all know all investment bankers are utterly trustworthy models of law-abiding probity at all times, even when offered the opportunity to clean up $100M in profits per day with no come-back. NB: Sergei Aleynikov is not, to the best of my knowledge, an investment banker: but all I know about him is hearsay and should be discounted accordingly.)
Gaah.
Truth stranger than fiction. Right now there is thunder and lightning outside. Ominous mood building.
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