system
Given the following post, respond as if you're commenting on Reddit:
human
What exactly happened with the Federal Reserve and the 7 millisecond thing?

I think I understand, but I'm not quite sure.
gpt
The decisions that the Federal Reserve makes have very large effects on the stock market.  If you know what the decision they are going to make is ahead of time then you can make a lot of money.  Because of this, they are very careful to not release the information early.  They decided that they were going to release the information at *exactly* 2:00 pm.  Under normal circumstances this information takes a little bit of time to travel to Chicago, via wires--about 7 milliseconds.  However, at 2:00 + 2 or 3 ms someone in Chicago placed a *huge* volume of trades taking advantage of the news, before anyone else could react to it.  Thus, the question is how did they do it?

The simplest answer is that they knew the news ahead of time and this is just insider trading (maybe... it's a fuzzy area).  They could have traded before 2:00 but didn't want to because that would expose them as clearly breaking regulations.  An alternative is that they took a loose interpretation of insider trading laws and decided that at 2:00 the information is public so a trade at 2:00 + 2 or 3 ms is not insider trading--it uses information that is publicly available.  Such a move would have to be settled in court.

The other possibility that is fun to think about but probably not what actually happened is that they have some way to send the information faster than the wires.  For example, a radio signal would travel at the speed of light--literally the fastest possible speed for information to travel.  Estimates for the time that would take are at about 3.2 ms, but that *could* be within the error of the Chicago or D.C. clocks (shouldn't be, though--there are systems in place to get those clocks synced just about as perfectly as is physically meaningful).

There was no theft of milliseconds, contrary to the titles of many news articles covering the story, and nothing was stolen from the Federal Reserve.  It was just a weird case of insider trading with knowledge that was public-ish.