Professors Balaji Prabhakar and Darrell Duffie (GSB) held a moderated conversation about the next generation of finance and high-speed technologies.

Balaji described the accelerating timeframes that gird securities trading infrastructure, where the time from "tick to trade" is now measured in tens of nanoseconds. He also highlighted the potential problems and advantages to be gained by exploiting such lightning-fast speeds. At that nano-scale, it can be hard for networks to properly sequence packets of data being sent over even the faster fiber-optic wires. "If you see a price that's favorable to your trading strategy and you cross the gate ahead of me, then your transactions should happen first," he said. "Unfortunately, in the world where these networks have 'jitters,' this is not easy to guarantee."

The speakers also agreed that one way or another, massive disruption is coming for financial institutions. "There is a mantra that is being repeated on Wall Street, 'We are a tech company that happens to be an investment bank,'" said Balaji. Redefining the role of banks from being consumers of technology to creators of technology will mean that "any bank that's not big enough or not nimble enough is going to lose out," said Duffie.

Excerpted from "How is Silicon Valley changing Wall Street?", Stanford Engineering News, April 02, 2019