Profitability in High Frequency Trading (“HFT”) is about being the first to respond to market events. Events which occur in Chicago markets impact New York markets. The first to learn about this information in New York can take appropriate positions and benefit. There is nothing new in this principle. Paul Reuters, founder of the Reuters news agency, used carrier pigeons to fill a gap in the telegraph lines and bring financial news from Berlin to Paris. The groundbreaking idea of the time was to use an old technology – the carrier pigeon – to fill a gap. What Paul Reuters did 160 years ago is being done again.
Today, we are revisiting an old technology, microwave transmission, to connect Chicago and New York at speeds faster than fiber optic transmission will ever be able to deliver.
This technology is emerging just two years after Spread Networks is reported to have spent 300 million dollars developing a low latency fiber optic connection between Chicago and New York. Spread’s fiber connection will soon be much slower than routes available by microwave.