The days of traders shouting orders on the New York Stock Exchange's floor may soon be over. A new breed of investing, known as High Frequency Trading, has taken hold of the equities market?one that relies on computerization and automation to exploit momentary price changes for an investor's financial gain. And where latency is the primary measure of success, calculated in milliseconds, fiber might not even be fast enough. But that's where the microwave radios come in.
HFT activity accounted for nearly 40 percent of the total volume of equities traded in 2012, a figure worth some 6.7 trillion euros. That's 6.7 trillion reasons for a pair of companies, Perseus Telecom and Colt Group SA, to offer their customers a microwave radio transmission service between the NYSE Euronext Basildon data center in London? home to the Euronext cash and Liffe derivatives markets?and Equinix in Frankfurt?where both the Deutsche Boerse cash and Eurex derivatives markets reside. Together, they're two of Europe's largest investment hubs.
Microwave radio is a line-of-sight transmission scheme that relies on a pair of high gain microwave radio antennas pointed at one another to transmit data at very high speeds. And by "high speeds," I mean they'll actually transmit data faster than the fiber optic networks offered by each company simply because the data travels a shorter distance? thanks line-of-sight requirement! Each radio relay has a maximum range of about 30 to 40 miles and are often located on mountain peaks because, again, line-of-sight and whatnot.
The technology itself is nothing new, AT&T has been developing microwave technology since its Long Lines systems in the 1950s and '60s. These relays used to daisy chain across the US but were overtaken by fiber optic technology in the 1980s. These days, microwave radio links are most often used by news vans to beam a feed from the reporter in the field back to the studio. That said, "There is more money being poured into this wireless space than any time in its history," remarked Mike Persico, chief executive of wireless communications network Anova Technologies. "High frequency trading is driven by being either the fastest to market, or equal fastest to market, and coming second is like losing," Hugh Cumberland, a manager at Colt, said in a press release.
Both companies microwave systems offer similar performance?reducing the time required to access the market by 40 percent, in the sub-4.6ms to 4.74 ms range, and offering 99 percent uptime. That's nearly half the ping time of the fastest fiber routes, which clock in at a pokey 8.3 milliseconds.
Yes, of course this method of investing is risky?especially to the market as a whole! Remember the biggest-ever daily plunge in gold values? Really? It happened just last month. HFT scripted responses that dumped gold as values fell only helped to exacerbate the price plunge. Similarly, the "flash crash" of 2010, when the US stock market plummeted 1,000 points in less time than it takes to heat a frozen burrito, is attributed to HFT systems. Ten percent of the stock market's value?poof, gone?in minutes.
No, of course the risk of setting off another Great Depression isn't enough to dissuade investors from the practice. ?Our customers are always looking for speed to market advantage,? said Andy Young, a Colt transmissions specialist. ?A combination of both microwave and fibre is the latest technology weapon in a high frequency trader?s armoury, as the race for more market liquidity gathers pace.?
Anything for a buck.
[Reuters - Colt - Low Latency 1, 2 - Images: The AP]
Source: http://gizmodo.com/how-high-speed-traders-use-microwaves-to-make-money-486353476
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Ladies and gentlemen, we have a winner. This year’s crop of Disrupt NY Battlefield startups has been one of our strongest yet, but out of the 30 that entered the fray only seven would go on to the final round. HealthyOut, Enigma, Floored, Glide, HAN:DLE, SupplyShift, and Zenefits emerged from the pack as our seven finalists, and their respective teams were faced with another challenge. They had to take the stage one more time to present and face even more intense scrutiny from our judges, Sequoia Capital partner Roelof Botha, Allen & Co. managing director Nancy Peretsman, SV Angel managing partner David Lee, KPCB partner Chi-Hua Chien, CrunchFund partner (and TechCrunch founder) Michael Arrington, and TechCrunch co-editor Eric Eldon. Our judges sequestered themselves backstage at the Manhattan Center for quite some time, but they eventually settled on one ambitious startup. Disrupt NY Battlefield winner: Enigma Enigma, founded by Marc DaCosta, Hicham Oudghiri, Jeremy Bronfmann, and Rapha?l Guilleminot, is a web service that allows its users to dig into a vast amount of publicly available (but hard-to-obtain) data. The service pulls its data from more than 100,000 data sources, but the process of sifting through all this information is deceptively simple ? a quick search for a person?s name and company brings up multiple previewable tables of information, and jumping in and playing with data is thoughtfully executed. Thinking of Enigma as a sort of Wolfram Alpha for public data gets you close, but Enigma is much smarter when it comes to finding connections between seemingly disparate data points. To date, Enigma has raised $1.45 million in seed stage funding, and has locked up partnerships with the Harvard Business School, research firm Gerson Lehrman Group, S&P Capital IQ, and newly-minted strategic investor the New York Times. You can read more about Enigma here And the runner-up: Handle Handle (or HAN:DLE), founded by Shawn Carolan and Jonathan McCoy, is a so-called ?priority engine? available as a web app and iOS app that aims to make users become more productive. And how do the apps do that? By basically folding the functionality of an email client and a task manager into a single service. Users are able to ?triage? their emails, as well as archive them for later perusal, but they?re also able to create tasks and schedule them for completion on a given day. The web app is full of power-user shortcuts
