If the news has been talking about the end of high-frequency trading, someone really needs to tell it to the CME Group and Nasdaq OMX.
Yesterday afternoon, news broke that the partners are working on a super high-speed link between the CME datacenter in Aurora, Illinois and the Nasdaq data center in Carteret, New Jersey.
[What’s faster than HFT? Jamie Dimon scrambling to keep his CEO-Chairman role at JPMorgan]
The new system, according to Nasdaq-CME claims, will shave roughly four milliseconds of one-way transmission time between the two markets. While CNBC justly reports that this is “a tiny sliver of time” they do point out its potential for traders to execute deals trades faster than even the fastest trader. As CNBC helpfully informs us, "According to one study, it takes a human being between 400 and 500 milliseconds to recognize and respond to a visual stimulus—let alone make a complicated financial investment decision."
Here are some details for our propeller-beanie wearing readers:
The link is composed of a series of towers transmitting microwave signals through several states. Those signals travel much closer to an absolute straight line from point-to-point than a fiber-optic cable that must follow the contours of the earth's terrain, bleeding precious time along the way.
"What's exciting is you are getting as close as possible to the theoretical speed of light," said Shawn Melamed, the global head of commercial products for Strike Technologies, the company that built out the new network. "The value of knowing what's the latest data for these cross-correlated assets...is really important for making your decisions, whether you're trading 100 shares or one hundred thousand shares."
[Not everything is faster these days. Sometimes thing hapen slowly like Jon Corzine’s slow-motion torching of MF GLobal.]
According to CNBC traders cannot execute orders over the system, just receive market data. That said, the traders can use the data to then execute trades via their other HFT platforms and co-location networks. As for cost, one media outlet report pegs it at $20,000 per month. Perhaps any savings with the faster trades can easily pay for this service, which is expected to live, writes CNBC, "over the next couple of months."
Phil Albinus is the former editor of Advanced Trading and he currently edits the FierceFinanceIT newsletter. Follow him on Twitter at @philalbinus.
Read the entire article: https://www.cnbc.com/id/100631346
Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio