In brokerage firms that rely on high frequency trading applications, sending and receiving data 1 millisecond sooner than a competitor can add up to significant advantage and generate huge profits. In fact, according to Information Week Magazine “A one millisecond advantage in trading applications can be worth an extra £80 million a year to a major brokerage firm” – so dependency on ultra-low latency trading systems¹ is now essential to gain that upper hand and win the deal.
That all sounds very technical, but the bottom line is that the trading company with the fastest network speed make the most profit. Trading centres can be separated by long distances and these locations are commonly connected by leased line fibre-optic networks. With speed of data transfer being the key, it’s no wonder that wireless technology is rapidly becoming the technology of choice.
Wireless Leased lines, such as those provided by Metronet UK, use microwave technology which travel through the air. That data travels 40% faster than light through optical fibre, meaning that sending a request for data and receiving a reply over a fibre optic circuit, will take longer than it would through wireless technology over the same distance.
Metronet (UK) PoP site in Manchester, United Kingdom.
For the geeks out there, microwave signals travel through the air at approximately the same speed as the speed of light through a vacuum, which is 299,792,458 metres per second – meaning the data has a latency (time of transmission) of 5.4 microseconds for every mile it crosses. Due to the refraction of light hitting the sides of the fibre cable, data through fibre has a latency of 8.01 microseconds for every mile of cable. Putting that into perspective, sending a data packet from Chicago to New York and back, a total distance of 1,400 miles, means the latency difference between the two mediums is more than 3.5 milliseconds.
Now, take into account that wireless signals are narrow beam, point to point, over the shortest direct route, whereas fibre cables have to follow existing roads, bridges, rivers etc. This means that data through fibre will also have to travel further too – creating additional latency than just the medium alone.
Of course, total latency in any network will increase due to other aspects of the network such as gateways, data queuing delay, network design etc. but it still all adds up to one thing – those firms that are embracing wireless technology are gaining the competitive advantage over those that are relying on fibre optic networks alone. Even if only due to transmission medium and simple geometry.
Let’s be honest here – for most businesses, wireless technology is beneficial for its ease and speed of installation, ultra-reliability and ability to be installed in locations that fibre doesn’t reach, but for a handful of companies out there with a need for speed, there is nothing that can compete. Well, until we discover something quicker than the speed of light that is…
¹Wikipedia: “Low latency trading refers to trading systems and network routes used by financial institutions connecting stock exchanges and electronic communication networks to rapidly execute financial transactions.”