Speed of light limiting stock trading, says physicist

Stock exchange trades now happen so quickly that the speed of light has become a factor, and exchanges may have to be relocated as a result, say researchers.

. Physicist Alexander Wissner-Gross of MIT and Harvard University and his colleagues examined whether there would be advantages to decentralizing exchanges - and, if so, where they should go.

. They concluded that putting an intermediate trading center between two major centers is advantageous if the trading is rapid and auditable. Using a formula they'd developed, they found that there is always an optimal trading position located between any two points on the Earth, with many, of course, in rural areas.

. The problem is that trading now happens so quickly that it's hit something like 90 percent of the speed of light. This can cause a competitive disadvantage for a trader who's physically a long way from the market.

. Rather than consolidate trading at places like the New York Stock Exchange, they say, the analysis calls for treating the planet itself as one giant trading floor.

. "We show that there exist optimal locations from which to coordinate the statistical arbitrage of pairs of spacelike separated securities, and calculate a representative map of such locations on Earth," say the researchers .

. "Furthermore, trading local securities along chains of such intermediate locations results in a novel econophysical effect, in which the relativistic propagation of tradable information is effectively slowed or stopped by arbitrage."

. If companies take note of Wissner-Gross's conclusions, it could lead to new data centers in rural areas, or even on barren islands in the middle of the ocean.