This is a nice plot for a movie, but not how HFT is really done. It’s so much easier to colocate on the same datacenter of the exchange and run algorithms from there; while those algorithms need humans to guide their strategy, the human thought process takes a couple of seconds anyways. So the real HFTs keep using the defined strategy while the human controller doesn’t tell it otherwise.
And in order to preserve equality among traders, each exchange already adds physically (loops of fiber or copper cable) some ns to closer racks so everyone gets at the system at the same time.
And then comes a really high added latency of the trade risk controller, which limits what a trader is allowed to expose itself to what is deposited or agreed with the exchange. And this comes with both latency and jitter due to its implementation, making even the faster HFT only faster on average, not faster at every transaction.
Rubens
For faster access to one exchange, yes, absolutely, colocate at the
exchange. But there's more then one exchange.
As one example, many index futures trade in Chicago. The stocks that
make up those indices mostly trade in New York. There's money to be
made on the arbitrage, if your Chicago algorithms get faster
information from New York (and vice versa) than everyone else's
algorithms.
More expensive but shorter fiber routes have been build between NYC and
Chicago for this reason, as have a microwave paths (to get
speed-of-light in air rather than in glass). There's competition to
have the microwave towers as close as possible to the data centers,
because the last mile is fiber so the longer your last mile, the less
valuable your network.
https://www.bloomberg.com/news/features/2019-03-08/the-gazillion-dollar-standoff-over-two-high-frequency-trading-towers
-- Brett
This was also pitched as one of the killer-apps for the SpaceX
Starlink satellite array, particularly for cross-Atlantic and
cross-Pacific trading.
SpaceX Is Opening Up the Next Frontier for HFT | CFA Institute Market Integrity Insights
"Several commentators quickly caught onto the fact that an extremely
expensive network whose main selling point is long-distance,
low-latency coverage has a unique chance to fund its growth by
addressing the needs of a wealthy market that has a high willingness
to pay — high-frequency traders."
This is a nice plot for a movie, but not how HFT is really done. It's so
much easier to colocate on the same datacenter of the exchange and run
algorithms from there; while those algorithms need humans to guide their
strategy, the human thought process takes a couple of seconds anyways. So
the real HFTs keep using the defined strategy while the human controller
doesn't tell it otherwise.
For faster access to one exchange, yes, absolutely, colocate at the
exchange. But there's more then one exchange.
As one example, many index futures trade in Chicago. The stocks that
make up those indices mostly trade in New York. There's money to be
made on the arbitrage, if your Chicago algorithms get faster
information from New York (and vice versa) than everyone else's
algorithms.
More expensive but shorter fiber routes have been build between NYC and
Chicago for this reason, as have a microwave paths (to get
speed-of-light in air rather than in glass). There's competition to
have the microwave towers as close as possible to the data centers,
because the last mile is fiber so the longer your last mile, the less
valuable your network.
The Gazillion-Dollar Standoff Over Two High-Frequency Trading Towers - Bloomberg
... and similar to this: https://www.extremetech.com/extreme/122989-1-5-billion-the-cost-of-cutting-london-toyko-latency-by-60ms
This is a nice plot for a movie, but not how HFT is really done. It’s so
much easier to colocate on the same datacenter of the exchange and run
algorithms from there; while those algorithms need humans to guide their
strategy, the human thought process takes a couple of seconds anyways. So
the real HFTs keep using the defined strategy while the human controller
doesn’t tell it otherwise.
For faster access to one exchange, yes, absolutely, colocate at the
exchange. But there’s more then one exchange.
Yes, but to do real HFT you will need to colocate at each exchange. Otherwise your competitors have a head start on you.
As one example, many index futures trade in Chicago. The stocks that
make up those indices mostly trade in New York. There’s money to be
made on the arbitrage, if your Chicago algorithms get faster
information from New York (and vice versa) than everyone else’s
algorithms.
Most traded index futures are longer than just that day closing, usually months to a year in advance.
They are influenced mostly by traders perception on economic futures, and the current stocks valuation is a poor proxy for it.
There is more chance in reading the news feeds and speculating its impact on perception than stocks.
Rubens
Serious HFT moved to shortwave years ago. The chicago-NYC routes by microwave still exist, but are only for things that need higher data rates (as measured in kbps). It’s hard to hide a giant log-periodic or yagi-uda antenna. The sites near Chicago that are aimed at London are well known to those in the industry.
William Herrin
Howdy,
Why is latency between the east and west coasts so bad? Speed of light
accounts for about 15ms each direction for a 30ms round trip. Where does
the other 30ms come from and why haven't we gotten rid of it?
Wallstreet did 
https://www.wired.com/2012/08/ff_wallstreet_trading/
adam
“Of course, you’d need a particle accelerator to make it work.”
So THAT'S why CERN wants to build an even bigger accelerator than the LHC!
Have you accounted for glass as opposed to vacuum? And the fact that fiber optic networks can’t be straight lines if their purpose is to aggregate traffic along the way and they also need to follow some less-than-straight right of way.
Regards,
Roderick.
Microwave is used for long haul wireless transmission for the ultra-latency crowd. Free space laser has more bandwidth, but is sensitive to fog and at least until the last few years much less range. I sell ULL routes to financial players. A 10 meg microwave circuit CME/Secaucus Equinix ranges from $185K per month to $20K a month.
Stephen Satchell via NANOG
Sent: Monday, June 22, 2020 8:37 PM
>> William Herrin
>>
>> Howdy,
>>
>> Why is latency between the east and west coasts so bad? Speed of
>> light accounts for about 15ms each direction for a 30ms round trip.
>> Where does the other 30ms come from and why haven't we gotten rid of
it?
>>
> Wallstreet did
> https://www.wired.com/2012/08/ff_wallstreet_trading/
“Of course, you’d need a particle accelerator to make it work.”
So THAT'S why CERN wants to build an even bigger accelerator than the LHC!
Yep, why to go around the planet chasing a perfect geodesic with as few relay towers or drones if you can go through (shortest distance is always a straight line as opposed to an arc).
While maintaining the speed of light in vacuum since neutrinos don't seem interact with regular matter, that's why they are so darn hard to detect.
All you need is an extremely powerful neutrino detector to get you above the 51:49 success ratio. (49% packet loss is not what we're accustomed to, but for these guys it's low enough to start making money).
It's quite a fascinating networking world these guys live in, working for a HFT company would be my dream job, always pushing the envelope, racing to the bottom, it's like F1 of the networking world just without the safety and fairness BS to slow you down.
adam
Many of the traders have set up their short wave radio transmitters for use across the Atlantic. Bandwidth is only 4 kliobits, but that is enough to send a message saying “buy the SPY Option contracts”. It is quite a bit faster than fiber.
Regards,
Roderick.