Gregory Laughlin, Anthony Aguirre, Joseph Grundfest
2013 · arXiv
High frequency trading has led to widespread efforts to reduce information propagation delays between physically distant exchanges. Using relativistically correct millisecond-resolution tick data, we document a 3-millisecond decrease in one-way communication time between the Chicago and New York areas that has occurred from April 27th, 2010 to August 17th, 2012. We attribute the first segment of this decline to the introduction of a latency-optimized fiber optic connection in late 2010. A second phase of latency decrease can be attributed to line-of-sight microwave networks, operating primarily in the 6-11 GHz region of the spectrum, licensed during 2011 and 2012. Using publicly available information, we estimate these networks' latencies and bandwidths. We estimate the total infrastructure and 5-year operations costs associated with these latency improvements to exceed $500 million.
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The crucial information is up and down ticks of the ES-mini futures at the Chicago Mercantile Exchange. These lead the S&P500 (SPY) index funding in NYC (by 4 milliseconds), and the ES-mini ticks up and down about once per second. This few bits of information carries huge value since much of the world's equity market responds to it. See https://arxiv.org/abs/1302.5966
That's why companies doing HFT or stock exchanges often use microwave links... Just to crank it to eleven err to gain that 30% back. Information Transmission Between Financial Markets in Chicago and New York: https://arxiv.org/pdf/1302.5966v1.pdf Time is money when it comes to microwaves: https://www.ft.com/content/2bf37898-b775-11e2-841e-00144feab... Trading Fortunes Depend on a Mysterious Antenna in an Empty Field: https://www.bloomberg.com/news/articles/2017-05-12/mysteriou... https://arstechnica.com/information-technology/2016/11/priva...
That's a great one. Related are the faster-than-light stock-exchange trading orders of the past few years. Some trades were originating out of Chicago for NY exchanges which, based on release timing of information, would have had to travel faster than light. Truth being that there's early access being offered some traders. http://www.theverge.com/2013/10/3/4798542/whats-faster-than-... http://arxiv.org/pdf/1302.5966v1.pdf
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