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This is a very basic question about the Stock Exchange, and I was looking for some concrete answers with a general understanding of how it works.

When a Stock Exchange is open for business in a country showing Public Limited Companies which are floating on said Stock Exchange, I assume that people within that country get 'signals' as to whether the current share price is going up, or down, before someone from another country, around a millisecond faster? Thus, if one could quickly stop time with a magic watch, walk across the Earth to another country, and quickly lock in a trade they would make the correct decision resulting in profit?

I will note, however, that the United States of America seems to use some form of lag, on purpose, so that they get up to date information which Tom Scott reports on.

Why do I ask? Because I have developed a physics technique to transfer a flag (which could represent a price going up or down) from a country, to another country, faster than anything currently available on the market. I believe I could pay off my student loan with this if I can hook up my physics device to a computer, and have a receiver in another country that inputs the trade.

Edit 1: to clarify I am happy to trade anything, for example foreign currency exchange (FOREX), so long as me knowing what a company within a country does quicker than everyone else gives me a competitive advantage.

Edit 2: I assume if I am trading on the London Stock Exchange, but knew something about the New York Stock Exchange before the London one I would have an advantage? I know nothing so please correct me.

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    This question seems offtopic as it is not much related to "personal financing" area. – tym32167 Jul 17 at 21:30
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    First, I'm guessing that PLC is an acronym for Public Limited Company here. It would be helpful to specify that. Second, the YouTube video you link to talks about one specific (and very small) stock exchange that intentionally adds a delay in comparison to all the big exchanges where large companies invest millions to get their servers as close as possible to the exchange to minimize delays (as discussed at the beginning of that very video). – Justin Cave Jul 17 at 21:44
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    If you have developed the ability to send information faster than the speed of light, yes that would be advantageous. I would hope that you'd be publishing papers on the fundamental advance you've made in physics and doing far more than paying off your student loans. – Justin Cave Jul 17 at 21:46
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    @securityauditor - High-frequency traders can already send information at essentially the speed of light from one point to another. So if you're trying to send information about the current price of a security on the New York stock exchange to a trader on the London Stock Exchange, you'd need to beat the speed of light. Without advances in fundamental physics, that would likely require the ability to build a device based on stable quantum entanglement which would be a massive, massive advance. – Justin Cave Jul 17 at 22:00
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    I’m voting to close this question because it is not relevant to personal finance. – Flux Jul 18 at 3:07
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Because I have developed a physics technique to transfer a flag (which could represent a price going up or down) from a country, to another country, faster than anything currently available on the market.

No, you haven't. Market Information these days travels almost instantaneously and in general a lot faster than trades can actually be executed. Your "new" system would also need to interface with both ends of the Information chain and the Interfaces themselves would most likely be the bottleneck.

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If we assume that you've made a significant advance in communication, the easiest option would be to do arbitrage. If you identify the same stock, commodity, or currency pair trading on two exchanges at the same time, you could buy on the exchange where the item is cheaper and sell on the exchange where the item is more expensive and make money on the difference.

As a practical matter, however, this is very unlikely.

  • It is already possible (and very common) for high-frequency traders to send this sort of information around the world at essentially the speed of light. Most of the time, the information is going to go via terrestrial fiber optic cable but worst case it'll bounce off a satellite. Either of those are essentially light speed communication (though the distance for something involving a satellite will obviously be greater than the point-to-point distance).

    If we assume you're competing with fiber, you'd need to beat ~0.7c (possibly faster, this article is several years old). If we assume you're going up and down to a satellite in low earth orbit, that adds at most 4,000 km which light would travel in roughly 13 milliseconds.

    If your device can beat a direct fiber connection, there is the potential to profit on arbitrage. Otherwise, your device would need to be able to transmit information faster than the satellite could between two exchanges that traded the same item and weren't connected by fiber. If such an exchange & commodity pair exists, it is likely that it would already be economically feasible to connect them with fiber to do arbitrage and that somebody would already have laid that fiber so you'd need something where direct fiber connection wasn't possible. It's hard for me to think of a physical reason that you couldn't do a fiber connection but there are lots of small exchanges in the world, maybe there are political reasons that one is accessible only via satellite.

  • If you were going to exploit microsecond advantages, you'd have to be a high frequency trader. That's going to involve several million dollars worth of infrastructure to do things like host your servers as close as physically possible to the two exchanges, writing hyper-optimized code to execute your trades, a significant amount of trading capital to be able to make money on tiny price differences, etc. If you have student loans, I'll safely assume that you aren't already wealthy enough to do this so you'd realistically need to sell the device to an existing high-frequency trading firm.

If you actually have a device that transmits information faster than the best fiber optic cable in the world, that would be a significant achievement that should generate plenty of scientific interest.

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  • So where does a FOREX platform like Plus500 get the data from? Surely, I could get information quicker than that platform could update their prices... – securityauditor Jul 19 at 14:45
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    @securityauditor - Presumably, they're getting a feed from the exchange. But getting information faster than a consumer trading platform isn't likely to be beneficial. You'd need to get the information faster than the high frequency traders that are already doing arbitrage. – Justin Cave Jul 19 at 14:54
  • Why not? If I know a price will go up before the commercial trading platform then I can quickly buy... – securityauditor Jul 20 at 1:19
  • @securityauditor - If you are entering a market order, the price on the screen is not necessarily the price you'll get. Your order will be sent to the exchange and matched with other orders. The high-frequency traders can place orders much, much faster than you and have much more current data so they'll have long since moved the price up or down to take advantage of the arbitrage opportunity. You have to beat their orders to the exchange and you're not going to be able to do that using consumer trading software. – Justin Cave Jul 20 at 5:14
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Theoretically Yes. Not sure for stocks but for FX. If you are able to know that the exchange rate goes up/down you might be able to make a $. BUT you are bound by your brokers trade delay, so practically nope.

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  • What if I traded on a smaller broker, that did not get this up to date information as quickly as one of the bigger exchanges? – securityauditor Jul 19 at 14:35

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