Renaissance Technologies LLC has applied for a patent for a new secret weapon that will help the hedge fund manager outrun high-frequency traders.
The New York-based manager's patent filing describes a novel way for “executing synchronized trades in multiple exchanges.”
If the patent is granted, RenTech will have exclusive U.S. rights for as long as 20 years to a process that — if it works as advertised — will thwart even the most predatory of high-speed traders. RenTech, which manages $32 billion, could also offer licenses to other managers to defray the cost of building and maintaining the required technology infrastructure.
The invention is the brainchild of RenTech's co-CEOs, Robert Mercer and Peter Brown. It involves not only sophisticated algorithms and a host of computer servers, but also atomic clocks precisely calibrated to vibrations of irradiated cesium atoms to sync orders to within a few billionths of a second, according to the filing.
The program first sends an order to a central server, which breaks it up into multiple smaller orders that are routed to venues offering the best prices and most liquidity, much the same as brokers do now. But before that happens, the smaller orders are sent to servers located as close to the exchanges as possible, along with instructions on the precise times they should be executed. The co-located servers sync their transactions so HFT firms won't have enough time to identify an order on one exchange and then race to another to trade against it.
Jonathan Gasthalter, a spokesman for Renaissance, declined to comment.
The RenTech patent application can be found on the U.S. Patent and Trademark Office's website.