The stock market relies on a rapid, accurate data transfer mechanism to inform players of any price fluctuations within the marketplace. If this mechanism is not functioning properly, information asymmetry will allow the more informed investor to capitalize and profit off his relative advantage. In essence, the faster the rate of information exchange, the higher levels of efficiency financial markets can achieve. Today, information exchange occurs almost instantaneously via the Internet, as well as optic fiber technology. However, neutrino beam technology has the potential to drastically speed up the rate of data transmission.
SEE: The Global Electronic Stock Market
Information Asymmetry in Security Markets
Legend has it that the powerful Rothschild family made an enormous sum in the 19th century, following Napoleon's crushing loss at Waterloo, by virtue of an immediate investment in British government bonds, which would appreciate once Europe stabilized again. As the vastly influential family had learned of the outcome of the battle before even the British government did, they were able to capitalize on their sizable informational advantage and invest accordingly, or so the story goes.
In much more recent times, the high frequency, automated trading industry has escalated dramatically. These automated techniques account for the majority "of the more than 10 billion shares traded daily across the numerous exchanges that make up the U.S. market," according to MIT's Technology Review. In this field, computer programmers write complex algorithms for programs that constantly monitor equity price movement, which then execute buy and sell orders when certain predetermined criteria are fulfilled.
Profitability hinges on the speed at which the computer servers can process minute changes in the discounting mechanism of the stock market, as well as the effectiveness of the underlying algorithm. Thus, faster processing systems are of special interest to firms that engage in these trading techniques, as even a slight informational advantage would be massively profitable.
SEE: The Pros And Cons Of Automated Trading Systems
The Basics of Neutrino Beam Technology
Get your thinking caps on; neutrino beam technology has the potential to render current data transmission technology obsolete. According to MSNBC, neutrinos are "extremely tiny particles with almost zero mass and neutral charge" that "are impervious to electromagnetic forces and respond very weakly to gravity." As such, neutrinos pass easily through even the densest of solid matter.
Through the use of a particle accelerator, scientists have figured out how to configure "beams of neutrinos, which result when speeding protons collide into a wall of carbon atoms." These beams are then directed towards a neutrino detector; it takes an immensely concentrated beam for this detector to notice a neutrino beam signal. However, as data transmission at longer distances requires much higher levels of particle density concentration, the technology has a long way to go before becoming relevant.
Applications and Implications
Don't take those hats off just yet. In addition to their ability to travel through incredibly dense matter, neutrino particles have been observed to travel near the speed of light. Radio waves are much slower and significantly more limited in their data transmission applications. Fiber optic technology is also intrinsically limited by the attenuation effect, which is the opposite of amplification.
Neutrino beam technology has none of these shortfalls. Theoretically, neutrino beam particle concentration can be increased indefinitely. Data transmission over distance? A non-issue. As mentioned, neutrino particles are not restricted by the medium in which they travel. Transmitting speed, regardless of the time and space through which transmitted, would be lightning fast and efficient. With neutrino transmission technology, financial markets would function even faster. Information on market movements would be updated and at the disposal of investors faster and more efficiently.
At the moment, neutrino beam technology is incredibly expensive. Of course, as the technology evolves, chances are that innovation and economies of scale would drive those costs down. However, a powerful particle accelerator is required to generate neutrino beams, a costly and dangerous device that, needless to say, doesn't fit in your average home office.
As far as Mom and Pops goes, neutrino technology will most likely not have an effect on their investment strategy. While the technology may enable financial markets to operate more efficiently as a whole, private investors will not stand to benefit. Institutional market players running high frequency, automated trading platforms may, however.
The Bottom Line
If neutrino beam technology realizes its vast potential, it will revolutionize the way trading is conducted in equity markets. Information asymmetry may initially give some market players an edge when the technology is first implemented, but the net result will be increased liquidity (and subsequent efficiency) in the financial markets.