Chapter 98

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Protagonist:

Chen Yi

Chen Yi unconsciously sat up straight.

High-frequency trading was his greatest capital for making money right now.

Any resource only has real-world value if it can be converted into cash through some pattern. The Magic Subway he owned generated direct profit through Skill Copy Scrolls, then supercomputers, then high-frequency trading.

Only with this layer could he make relatively full use of the Magic Subway.

If any one of these layers were missing, everything would be greatly diminished.

Just look at the rulers of Africa: they have diamonds but are not allowed to sell them in the free world; they have ivory but are not allowed to sell it on Earth; they have minerals but no ports or railways for transport. From the twentieth century to the twenty-first, they are equally rich and equally poor.

Without high-frequency trading, or if it were some foolish child, they might really take a supercomputer to steal QQ numbers and game accounts—that would be using an antiaircraft cannon to shoot mosquitoes, a pure waste.

On stage, Lei Poguai began lecturing from the origins of "high-frequency trading," then moved on to the methods currently applied on Wall Street.

Such a distinctive stock-trading method obviously attracted the attention of countless students.

Professor Lei said in an affirmative tone: "Future financial stocks cannot be separated from the influence of high-frequency trading. If you have the chance to trade stocks or futures in the future, you must study it constantly. Based on current data, institutions operating supercomputers generally see daily fund returns of over 1 percent. Calculating compound interest, that's over twelve times in one year. For institutions running well, who knows—hundreds or even thousands of times are possible..."

He wrote on the blackboard, and Chen Yi silently sneered: My daily profit is over 50 percent; what kind of broken computer is his?

But a twelvefold profit is considered outrageous by ordinary people. Han Jie put down her teacup, listening while thinking: "That way, buying a supercomputer would be very profitable?"

For traditional industries, an annual profit of 30 percent is enough to satisfy the boss and let him sleep soundly at night; 50 percent is considered rich, enough to keep other bosses awake at night.

Her thoughts were similar to Chen Congyu's.

Moreover, the two were generally alike—people who could actually afford a supercomputer.

Chen Yi sipped his tea and explained casually: "That thing has computational limits. And the market is only so big. Investment includes not just hardware and software, but also interest expenses, personnel salaries and commissions. It's hard to recoup costs within a year or two. The fixed capital investment is too large."

"A slow computer can be attacked by a fast one, which can actually cause losses. But fast computers are too expensive, and deciding how many resources to use to attack others is another problem."

"There aren't many high-frequency traders now. Later, I expect a great melee of a hundred groups."

"If it's not a particularly fast supercomputer, it's still subject to the exchange. Being a colocation service provider is a huge annual expense."

He spoke from deep experience.

Don't look at him earning tens of millions of US dollars a day now; that's based on the Siren's ultra-high performance and zero cost.

The Siren can earn excess profits from lightning trading that monopolizes half of the New York Stock Exchange. Other traders don't have this ability.

Give them a smaller exchange, and they couldn't do it.

If the Siren's costs were factored in, the University of Wisconsin Computer Center's annual budget is 1 billion US dollars, 85 percent of which is federal funding, the rest raised by the state of Wisconsin itself.

Including other projects at the Computer Center, the entire center has 3,800 employees centered around the "Siren," plus over 3,000 visiting researchers—the latter work at the Computer Center for two weeks or slightly longer each year. They study many projects including high-performance computing and provide support for the Siren's further upgrades and maintenance.

Although Chen Yi's Gold Source International only secretly used about 15 percent of the "Siren's" performance, these resources were actually part of the design margin. Because the "Siren" cannot be updated every year, while research project demands increase daily, by the second half of this year or early next year, the resources they can use will become fewer and fewer. This is actually equivalent to supercomputer wear and tear.

Wall Street has many tycoons, but those who can produce billions of US dollars in private capital to custom-build a cross-era supercomputer, wait two to three years for delivery, and then spend over a hundred million US dollars on land and employees to establish a computer center—that is absolutely unique.

For such a huge one-time capital investment, if financed through bank loans, those vampires would dare charge 40 percent annual interest, and there would certainly be clauses over 100 pages and additional requirements over 10 pages...

Precisely because of this, with high-frequency trading still in its infancy and profit prospects unclear, traders mostly chose mainframes. The few who chose supercomputers all had deep backgrounds and resources—they would mostly think when signing: if we can't make money, we might as well donate it to our alma mater.

The 1 percent daily profit Lei Poguai mentioned was based on mainframes and ordinary supercomputers. Their computing power is average and they have no qualification to compete with the Siren.

But competition among them is becoming increasingly fierce.

From Chen Yi's perspective, if any trader's computer performance reaches over one-third of the "Siren" and mainly trades on the New York Stock Exchange, his own profit would drop by over 70 percent, because his own supercomputer would have to spend most of its energy defending against enemies rather than swallowing retail investors' funds.

If two traders' computer performance reaches this figure, the "Siren's" daily profit would not exceed 500,000 US dollars—not even enough for its own depreciation.

Furthermore, if high-frequency traders' computer performance does not continue to improve, the New York Stock Exchange's attitude will also become unclear.

They are currently in active contact with Tang Xiongfei and others, but the final result is hard for either side to predict.

Chen Yi thought too far ahead for a while and didn't speak for half a day; Han Jie quietly poured tea for him.

Some classmates sitting around were already discussing animatedly; now, hearing his comments, they found them reasonable yet hard to believe.

They were too embarrassed to tell Chen Yi, so they discussed among themselves there.

However, students just entering university lack broad vision; few can understand the value of 100 million RMB. Only heard someone comment: "Even if that supercomputer is worth tens of millions, I think it's worth earning back. Pity I'm not in the United States; otherwise I'd definitely get one to try. Also, if there's really a twelvefold annual profit, why not take a loan to buy it."

Chen Yi couldn't help but curl the corners of his mouth.

Taking a bank loan for two to three years to make fixed capital investment? That's not a financier; that's the Ministry of Railways working for the bank.

Han Jie knew Chen Yi well and asked softly and curiously: "Not enough?"

"Even in US dollars, you can't buy good stuff."

He had just finished speaking when Professor Lei on stage said: "Are you all now thinking this money is really easy to earn?"

"Yes..." some students shouted in cooperation.

"Actually it's difficult as heaven." Lei Poguai began writing on the blackboard: "High-frequency trading is a financial product requiring ultra-capital intensity. Think about it: a stock averages over ten dollars per share. If relying entirely on exchange rebates, 100 shares earn only 20 cents—equivalent to earning 25 cents on 1,000 dollars, or 25 dollars on 100,000 dollars. Of course, their trading speed is very fast, but no matter how fast the speed, filling a computer with funds requires over a hundred million dollars, and to form an advantage, one billion dollars is indispensable..."

After writing these, he chuckled twice and said: "Now, do you feel it's somewhat difficult..."

The circle of people around Chen Yi looked at him with amazed gazes.

What he and the professor said was actually the same meaning, just different expressions...

Fortunately, the large classroom needed some order, so the students' small talk didn't travel too far.

Lei Poguai's style was to let them discuss while he continued lecturing as usual.

But the students' discussion focus had now become that of bystanders. They no longer imagined themselves as protagonists, but instead offered strategies for high-frequency trading participants.

And the people around Chen Yi focused more on him themselves, with fewer speaking out to comment; no one liked to show off their skills before an expert.

Chen Yi calmly drank his tea, occasionally chatting a few words with Han Jie.

He himself was doing high-frequency trading; though not an expert, he was at least a seasoned hand. What he said had evidence and was completely different from others' guesses.

Between one or two sentences, there were words that struck directly at the essence—something the students did not possess.

Perhaps, once they studied hard, graduated as top students, became among the top 5 percent of the entire year, had the chance to study at world-renowned universities, then struggled on Wall Street for three to five years, gained Upper Management's attention, and personally manipulated transactions for a year, accumulating enough experience, would they have sufficient understanding.

Or perhaps, like Professor Lei Gongpo, specializing in economic and financial theory, once his fame grew and his age advanced, he would naturally come to know many financial institution heads, receive invitations from various financial institutions, and thus analyze examples to reach conclusions.

Lin Yuan sat not far ahead; she could hear what Chen Yi said, she just did not speak or discuss. Seeing that every word hit the mark, she could not help but think: Although he is a rich kid, he does have some genuine talent and learning; it seems he got into Jiang University through his own ability.

Her ill feeling toward Chen Yi decreased considerably for a time.

The students listened attentively, and the professor lectured with equal passion.

Chen Yi sat up straight, preparing to keep listening, when Lei Gongpo suddenly shifted his tone and began discussing the drawbacks of high-frequency trading.

"Chain reactions are what high-frequency trading must take most seriously..."

Chen Yi listened, his brow gradually furrowing.

In his view, Professor Lei Gongpo, overall, approached high-frequency trading from the perspective of ordinary people—for example, that chain reactions would cause stock market turmoil, ultra-fast trading would create new unfairness, and the 2 percent fluctuation pursued by high-frequency traders would cause excessive market volatility...

However, as a high-frequency trader who had entered the market, Chen Yi's impression was entirely different.

To make money in high-frequency trading, market fluctuation is indispensable; this is actually also the premise for the existence of market makers.

As for chain reactions, unfair unfairness contains both risk and cost. If financial markets all proceeded in the direction ordinary people hoped for, then the so-called world economy would not exist at all, and unless all humanity returned to self-sufficient agrarian society, there would always be someone dissatisfied.

Furthermore, if financial markets proceeded in the direction ordinary people hoped for, the final result would likely be that everyone was dissatisfied.

The professor spoke for about ten more minutes before beginning his normal lecture.

Chen Yi applied an Intelligence Scroll to himself, listening to the lecture while thinking about his own matters.

The class period passed in a flash.

As soon as class ended, Chen Yi, like a good student, rushed straight to the lecture platform, still holding his teacup.

He blocked Class Monitor Lin Yuan's path and first asked: "Professor Lei, how can one increase the profits of high-frequency trading and lightning trading, and how can one utilize their monopoly status?"

This sharp question about reality caused Professor Lei to stop in his tracks.

... (Unfinished. If you want to know what happens next, please log in to www. qidian. com for more chapters. Support the author, support genuine reading!)