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WSJ: “Microwaves—Not Fiber Optics—Are Latest Thing for High-Frequency Traders”

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Very interesting piece today by the WSJ about telecom companies providing ultrafast data microwave links to HFT traders.

Trading firms, angling for even a split-second advantage over rivals, are rushing to build chains of microwave dishes to provide higher-speed links between financial markets in Chicago and New York.

Much of the new, ultrafast telecom traffic will have to pass through this industrial area just outside New York, home to oil-storage facilities, scrap yards and the warehouse of computer servers running the Nasdaq OMX stock market.

That’s made the cellphone tower alongside the rusting bus a symbol of a new telecom boom, as well as a potential cash cow for its owner, cell-tower landlord TowerCo LLC.

“That one’s been like tower gold,” says TowerCo sales director Todd Boyer. “It seems too good to be true that eight different companies want to get on this tower.”

Wireless links are cool, because they are faster than fiber optics if you can manage to find cell towers in a line of sight all the way to the destination. Well, just a bit faster in fact, but that bit amounts to serious money in a HFT world. New Jersey would be 6,55 milliseconds away from Chicago with fiber, against 4,25 for the microwave link. Wait, did they say Chicago?

One trading firm marketing a new microwave network, Tradeworx Inc., says the 2.3 milliseconds it will save users are worth $1,350 a day for a trader trying to profit from some price differences between S&P 500 futures in Chicago and a corresponding security in New York.

Commodities HFT seems to be the leading force for innovation these days. The MIT technology review published a great portrait of Tradeworx and it’s founder Manoj Narang back in 2010.

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Written by Francois Pilet

May 30, 2012 at 11:44 am

Posted in commodities, milliseconds

Tagged with ,

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