Wireless Suppliers Say They Beat Fiber for Trading Speed
December 30, 2011Laton McCartney
Suppliers of high-speed wireless communications gear are currently promoting their products as ideal for electronic trading. The appeal: speed, says Michael Stewart, CEO, Escape Communications, based in Torrance, Calif.
“Our new EXM-2LL microwave radio Indoor Unit (IDU) offers the lowest latency on the market today, which makes it ideal for time-critical applications such as electronic trading,” says Stewart.
Renaissance Electronics Corp., Harvard, Mass., Is also touting its recently introduced LightSpeed series high speed millimeter-wave radios with “super low latency” as ideal for financial transactions given the nanosecond time scales involved.
What’s of note about these offerings is that the suppliers are promoting microwave and millimeter-wave based wireless technology as faster for transmitting messages rather than fiber optics, the traditional approach.
And they are not alone with this approach. For instance, McKay Brothers, a New York-based firm that builds low-latency networks for high-frequency trading, is constructing a microwave network between Chicago and New York.
“We are revisiting an old technology, microwave transmission, to connect Chicago and New York at speeds faster than fiber optics will ever be able to deliver,” the company claims on its website.
The firm figures microwave transmission could set a new record for transmission speed between New York and Chicago. Using fiber optics and drilling through hills for the most direct route, Spread Networks currently offers a round-trip time of under 16 milliseconds, the speed to beat. But with microwave transmission, communications can go from mountaintop to mountaintop, without interference – or drilling.
"Spread’s fiber connection will soon be much slower than routes available by microwave,'' by McKay Brothers' account. But McKay presents no speed comparisons.
Of course, microwave has been around for decades so if it becomes the technology of choice for highspeed wireless trading networks, exchanges and trading firms will journeying back to the future. And despite the high speeds (microwave can generate of up to 10 Mbps), it is not without its problems. Transmission is only possible on a line of sight basis between two towers or antenna and practically can’t extend more than about 40 miles.
Still, it’s not subject to the delays that fiber optics can experience when transmission enters and exits a city. Stewart notes that fiber optics networks are often installed in rings around cities. This routing can slow transmission speeds. “With microwave you don’t have this problem.”
Both Escape and Renaissance have been selling largely into the defense, aerospace and scientific markets, where microwave technology has long been entrenched. Now, however, they’re seemingly trying to move into the financial services sector. Renaissance’s recently introduced LightSpeed series comes with VOIP and financial transaction commands and can be custom configured for the most demanding commercial applications, the company says.
More and more trading firms have moved recently into High Frequency Trading (HFT) which, of course relies on incredibly fast (sub millisecond) trading speeds. The Boston based research firm Aite Group, estimates, for instance, that HFT will be up by at least 40 percent in Europe in 2012.
And that, Stewart says, is merely the tip of the iceberg. He asserts that additional exchanges and trading firms are quietly developing their own private, wireless low latency, microwave based networks to ensure greater trading speeds. “That matters more than traditional performance measures like resiliency or reliability.”
These firms are extremely low profile regarding their development of high speed wireless transmission networks. “I came out of the defense industry, and the trading firms are secretive or more than special clearance beyond DOD,” Stewart says. “Some traders are speed junkies. They need the network to be bullet fast, not necessarily bullet proof."
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