how quants made billions using this cheese strategy (and how the CME stopped them)

In this video I go over how quant devs and quant traders used a cheese strategy to make billions off the CME (Chicago Mercantile Exchange) and ensure they can react to events before they actually happened. This strategy is discussed in detail in a public patent buried in the deep crevices of the internet. I break down the technical details in a way that even the average goldfish could undersatnd.

00:00 Intro
00:35 what is a cheese strategy?
02:05 osi model
03:25 tcp properties
05:35 how devs weaponized in trading
13:20 how the cme patched it
15:40 outro

[kenaj]

What's funny is that everything you would need to figure out this strategy would be taught to you in first 2 years of your CS degree, yet it is so revolutionary. Creazy.

[timlind]

This is crazy that you dive into TCP protocols.... I was not expecting this and wish I knew this when my, non-finance, company was using optimized TCP stacks for other purposes.

[monad_tcp]

Once I cheeses some API by crafting my entire request in a single packet while other applications where sending 2 or 3 packets.
But this is on another level, I did that to save resources in a GPRS network and get priority over the other credit card transactions of the other customers, thus my system would complete transactions faster and give a better sensation for the end user when the CC network was congested.

[Philgob]

amazing video, please do more breakdowns of publicly available defunct strats

[borntodoit]

Cheese strategy = a strategy which focuses on the holes in the system (the cheese)

Eg if a broker has a glitch you exploit that glitch for a winning strategy

This cheese strategy for trading is based on exploiting TCP in the technical stack (OSi model)

[arthurgill]

My first job in what would become my career field was the "physical layer monkey" for a large aviation company and OSI was beat into me. That was 20+ years ago. Trading is a new hobby for me so I found this fascinating. Thanks for the quality video :)

[ericjondahl]

Amazing! Thanks for posting. Just subscribed on first ever watch. Very rare for me. 👍🏻

[edgeprobability]

i'm not proficient enough to have implemented this, but it's still valuable in a sense to understand the breadth of Alpha. great vid!

[josephwehby]

Would love more of this type of content! Great Video!

[j--kz]

I traded at a major brokerage with it's own widely used platform. I remember either reading or hearing they used the transport layer to read customer orders before they hit the trading platform

[alienxna]

Really enjoyed this. Brought back happy memories of working in Data Comms/Networking in the mid'80's - early '90's. Even though most of my career was in Software Sales, I so enjoyed 'hooking stuff up' from PCs with Modems, LANs using base/broadband/LU6.2 TR, Mainframe connectivity - ICL C03 and IBM SNA 3270 and implementing first versions of Novell Netware (how many disks & manuals?!?), Banyan-Vines, Ungermann-Bass and OS/2.

[carlpeterson]

Patent attorney here. I reviewed the patent and can confirm that coding jesus is the messiah.

[Pjblabla]

Thanks for covering these topics which are typically not covered on YouTube

[advitiyajadhav]

love this content. make a series about explained version of known quant models.

[ourworldisstrange]

The fact I just got done making my own networking tool where I learned how to craft the IPv4 header, TCP header, etc and validate and manipulate packets and checksums is ironic.

[uxjkdkn]

this is going to be fucking insane if this video actually does a deep dive on the patent and its implementation.

[montealadadi]

I have no idea whats going on but I am enjoying this.

[kyoko]

It's kind of funny how they are literally exploiting every single layer of the communication stack. Since they have gotten their fiber link and reduced their latency now they have to cheese the communication stack and possibly any other layer of the communication layer to maximize their execution. It's actually quite interesting.

[tubopedia]

This was such a good watch. Feels like its in a very similar vein/spirit of front running but definitely different.

[tlamz]

Really insightful Please do a vid reviewing the Certificate in Quantitative Finance (CQF) next