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In the late 1700s, the young US government decided to assume the debt the Continental Congress incurred during the Revolution. Traders chartered stagecoaches & boats to beat messengers & buy this debt for $.10 on the dollar, only to flip it back to the US when news finally came.pic.twitter.com/Zd9viEZV4k
Using stagecoaches to beat the Postal Service & trade ahead of news was a common high speed trading tactic in the early 1800s. The US government tried to crack down on the practice with high speed mail services of their own, but to little avail.pic.twitter.com/zeZ28cNmZW
As technology improved, so did the speed schemes. Traders began placing poles with signal lights on high hills to transmit messages via telescope ahead of even the fastest stagecoaches.
Soon the invention of the telegraph would drastically change how high speed traders would behave. Power shifted to the telcos who controlled these telegraph lines.
Below thread from @_John_Handel fabulously explains:https://twitter.com/_John_Handel/status/1301990614888845312?s=20 …
Even in the CME trading pits there were constant attempts to gain consistent edge. Traders would wear special platform shoes that let them see & trade over shorter competitors. Where else would official rulebooks include specific limits on shoe height?pic.twitter.com/LZGQoABAos
I say all this to give context. Before the game was fast horses & special telescopes. Today it's glass fiber optic cable and microwave towers. This kind of jockeying has always existed and likely will always exist.
Across all high speed trading eras, one theme is clear: it's nearly impossible to stop smart, very rich traders from finding an edge, whether it be new technology or loopholes in existing laws.
This story is really similar with how Nathan Rothschild traded UK govt bonds after the battle at Waterloo, if I recall correctly.
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