The Great Race for Low Latency
In the race to place trades in low latency/ high frequency environments, the ability to shave two milliseconds off can place a high frequency firm at a huge advantage over its competition.
By Maureen Nevin Duffy
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It’s almost unimaginable in this age of fiber optic lines, satellite transmissions and wireless everything that physical space can still present barriers to competition. But in the race to place trades in low latency/ high frequency environments, the ability to shave 115 miles off the journey information must travel from Chicago to New York, it would save two milliseconds from the round trip and place a high frequency firm at a huge advantage over its competition.
Don’t worry if none of this sounds familiar. The methods for reducing latency are still as cloaked in secrecy today as they were in Napoleonic times when bankers Francois and Joseph Blanc bribed operators of Claude Chappe’s 1793 invention, the semaphore telegraph, to tip them as to whether the Paris Bourse was trading up or down. By the time they were caught, in 1834, the brothers had made a bundle. They had simply to note whether packages arriving by coach from Paris to Bordeaux were wrapped in gray or white paper, and instantly they’d knew whether to buy or sell their shares — nearly a day before the papers could carry the news. Today, latency secrets are more confined to who has the best equipment or where the best unused telecommunication lines are, than unpublished market news. ....