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HFT IS short for high-frequency trading, the predominant communication of financial markets around the world. SimanaitisSays has touched on this topic twice, “Trading in Nanoseconds”, June 16, 2014; and ”Lasers Over Mahwah”, November 16, 2014. Both were based on articles in the London Review of Books.

Talks about Future Shock! A lot has happened in less than five years.

In fact, Donald MacKenzie, the source for my second piece, has now brought matters up to date, specifically in the March 7, 2019, LRB article “Just How Fast?” Here are tidbits from his latest analysis of HFT.

How Big a Deal? MacKenzie writes, “About half of all buying and selling on many of the world’s crucial financial markets is now automated high-frequency trading.”

As an example, MacKenzie cites, “The CME [Chicago Mercantile Exchange] is the world’s most important financial exchange, with no real rival in the U.S. or internationally.” Other major datacenters are in Mahwah New Jersey (across from New York City); London; and Frankfurt.

How Fast is Fast? Back in 2011, an HFT response time was five microseconds, five millionth of a second. Today, MacKenzie says it’s 84 nanoseconds, 84 billionth of a second, 60 times faster than it was in 2011.

“In a nanosecond,” MacKenzie writes, “the fastest possible signal—light in free space—travels just thirty centimeters, or roughly a foot.” Fiber-optic cable used to be the fastest means of data transmission. However, strands of such cable slow light down to around two-thirds of its free-space speed.

“By contrast,” MacKenzie notes, “microwave and other wireless signals travel through the atmosphere at nearly full light speed”

The Chicago Mercantile Exchange’s Tower. CME has recently installed a tower, some 330-ft. tall, designed to accommodate microwave dishes, though none had yet to be installed when MacKenzie visited late last year. Notes MacKenzie, “Each of the firms that compete to have the fastest Chicago-New Jersey link will have no real choice but to install microwave dishes on the tower.”

Fiber-optic cables being the slow link, MacKenzie notes that dish users “have been promised that the cables from their dish into the datacenter will be of the same length wherever their dish is placed on the tower.”

A Taller Tower? Fast though it is, microwave transmission is line-of-sight technology, with the curvature of the Earth setting the maximum distance between microwave towers. This is particularly critical in a London-Continental link. Lake Michigan was also a challenge, though less than the English Channel.

London-Frankfurt geodesic. Image from Great Circle Mapper

The geodesic (or Great Circle) path between London and Frankfurt crosses the east coast of Kent, England. “In 2016,” MacKenzie writes, “two HFT-owned microwave companies applied for planning permission to build 300-metre masts—three times as tall as the CME tower, as tall as the Shard or the Eiffel Tower.… ”

The Dover District Council nixed the plan, with relocation of the masts adding around 10 microseconds to each transmission.

What About Shortwave? MacKenzie writes, “Like microwave, shortwave is an old technology: It’s what Radio Moscow used to use, and the Voice of America and BBC World Service still rely on it in some parts of the world.”

Image from BBC News.

The beauty of shortwave is that some of it bounces back to Earth from the ionosphere. That is, at least to some extent, shortwave signals aren’t restricted to line-of-sight. “They can travel over the horizon,” MacKenzie notes, “sometimes for thousands of kilometres—potentially across the Atlantic, for example.”

The words “some” and “sometimes” may be off-putting. But MacKenzie predicts, “With skilled planning and sufficiently powerful transmitters, shortwave signals will probably manage to reach London and Frankfurt from Chicago, much of the time at least. But what about Mumbai, Singapore, Hong Kong, Shanghai, or Tokyo?”

Financial Satellites? MacKenzie observes that the cost of launching satellites is coming down sharply. “I wouldn’t be entirely surprised,” he concludes, “if before too long, a world-girdling satellite network became part of the infrastructure of finance.”

That five-millionth of a second in 2011 is looking awfully lethargic. ds

© Dennis Simanaitis,, 2019

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