5 ms·

Jump Trading, Virtu and the 'hidden optical fibre cable' under an Ohio field

61 points by throwaway2037 2y ago

dinkblam 2y ago
why would a radiowave that is reflected off the atmosphere (and therefore taking the longer route) be faster than a direct fibre cable?
- deleted 2y ago
  [deleted]
- scrlk 2y ago
  Radio waves travel at nearly the speed of light, whereas light in an fiber optic cable travels at ~67% of the speed of light due to the refractive index of glass.
  - cypherpunks01 2y ago
    Ericsson blog wrote: In a vacuum, electro-magnetic waves travel at a speed of 3.336 microseconds (μs) per kilometer (km). Through the air, that speed is a tiny fraction slower, clocking in at 3.337 μs per km, while through a fiber-optic cable it takes 4.937 μs to travel one kilometer – this means that microwave transport is actually 48% faster than fiber-optic, all other things being equal.
  - JumpCrisscross 2y ago
    More bluntly: light in a fibre is still bouncing around a lot.
    - analog31 2y ago
      Not in single mode fibers, which still exhibit the effect. It's just about the refractive index of glass.
      - bcrl 2y ago
        Yes, even in single mode fibers light is bouncing around between the layers of glass with different diffraction indicies. The pulses just aren't dispersing while doing so.
  - stephen_g 2y ago
    I worked for three years designing custom low-latency point-to-point microwave radios for HFT for this very reason. They didn't need very high bandwidths (their long-haul network was less than 200 Mbit, whereas in New York/New Jersey we had about 5 Gbps because the hops were much shorter and they had licenses for more RF bandwidth at a higher frequency). At those time scales, the difference is so large, it was incredible what they were willing to pay to build these networks!
    - scrlk 2y ago
      I somewhat regret not specialising in RF/comms in my EE degree - this side of HFT sounds like a fascinating line of work (Trading at the Speed of Light was a great read).
      - thijson 2y ago
        I doubt there's much here that's cutting edge. Any digital processing that's done in typical radio's to correct for channel impairments is avoided as it just adds latency. Meanwhile LTE is using as many digital techniques as possible to maximize bandwidth (MIMO, HARQ, OFMDA)
        stephen_g 2y ago
        Haha, you got us :) - in terms of the digital side yes, kind of. We’d even try to not have any digital in the path if possible on some hops! We did have things like LDPC (and different FEC on control packets) but it was definitely not as complex as LTE or newer cellular or WiFi standards. But what was avoided digitally meant far more work going into the analogue side to improve SNR, dynamic range, NPR etc. through the signal chain.
- FredFS456 2y ago
  Speed of light in an optical fibre is about 2/3 that of the speed in air
- _qua 2y ago
  Light doesn’t go at light speed through optical fiber.
  - AStonesThrow 2y ago
    By definition, it does, because the maximum speed is qualified by "the speed of light in a vacuum", so the speed of light [in other media] is simply a function of how much the medium slows it down, yet it is still the speed of light. Funny how that works!
  - nimish 2y ago
    Sure it does. It's just that the speed of light in non-hollow optical fiber is slower than light in a vacuum. Microsoft bought a hollow optical fiber company for a reason.
    - cycomanic 2y ago
      Yes, funnily enough Microsofts reason was not HFT but AI. Essentially inter-datacentre training is limited by latency between the datacentres. Generally they want to build the datacentres close to metro areas, by using hollow core fibre the radius of where to place the data centres has essentially increased by 3/2. This significantly reduces land acquisition costs, and supposedly MS has already made back the acquisition cost for Lumenisity, through those savings.
      - 3eb7988a1663 2y ago
        That feels somewhat implausible. I assume a Microsoft sized data center starts at over $100 million. Moving the footprint X miles away might be cheaper, but is probably a drop in the bucket given everything else required for a build out. I would further assume that they were already some distance away from the top tier expensive real estate to accommodate the size of the facility.
        donavanm 2y ago
        Its reality. Its generally about site and infra access, including power and fiber paths. The bigger providers (eg AWS) simply dont have more feasible sites that are within a few ms of the existing region DCs. Expect to see more infrastructure like “local zones” or AZs that are tens of ms away from the rest of the region.
- indiosmo 2y ago
  In addition to the radio signal being faster as noted by the other commenters, for long distances the radiowave is actually the shorter route. If you take one of the routes in the article, Chicago to Sao Paulo. The distance is about 8,400km in a straight line. According to https://en.wikipedia.org/wiki/Skywave https://en.wikipedia.org/wiki/Skywave a single shortwave hop can reach 3,500km, so 3 hops are required, or about 30ms. The shortest commercially available submarine cable between the US and Sao Paulo alone is significantly higher than that (almost double), and it comes out of the east coast, so you'd still have to factor in the latency between Chicago and New York. Even specialized low latency networks that mix wireless and fiber will still have much higher latency than the radio. The tradeoff is that shortwave radio has very little bandwidth so you're restricted to simple signals.
throwaway2037 2y ago
FT Alphaville: High frequency trading Skywave Networks accuses Wall Street titans of ‘continuous racketeering and conspiracy’ FT/Alphaville is blog attached to The Financial Times newspaper. It free to sign-up for an account.
brudgers 2y ago
https://archive.ph/2vQm6 https://archive.ph/2vQm6
biomcgary 2y ago
Other than seemingly perverse incentives, is there a good reason not to quantize trading time?
- mikewarot 2y ago
  I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front running.
  - biomcgary 2y ago
    30 seconds seems reasonable. Don't the markets themselves make a fair amount of money off of providing fast access to the HFTs? Is that the primary perverse incentive?
  - Loughla 2y ago
    I've read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations. I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.
    - mhmmmmmm 2y ago
      CLOB's force market participants to compete on pricing (which is only indirectly related to latency, since you can quote tighter if you know your orders won't get picked off by other, faster, traders) Taiwan used to have Batching style auction and it ultimately led to worse prices: https://focus.world-exchanges.org/articles/citadel-trading-auctions https://focus.world-exchanges.org/articles/citadel-trading-a... > Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
    - JumpCrisscross 2y ago
      > read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten. > Every 30 seconds. Cap the power of connection speed in trading I'd go back to Wall Street if this happened: it would make market making profitable again.
spirobelv2 2y ago
mev but for tradfi
frinxor 2y ago
some fantastic older reading (2014): HFT in My Backyard https://news.ycombinator.com/item?id=8354278 https://news.ycombinator.com/item?id=8354278 https://news.ycombinator.com/item?id=8371852 https://news.ycombinator.com/item?id=8371852
- ikmckenz 2y ago
  Also, from the same blog: Shortwave Trading | Part I | The West Chicago Tower Mystery https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-trading-part-i-the-west-chicago-tower-mystery/ https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-tr... SHORTWAVE TRADING | PART II | FAQ AND OTHER CHICAGO AREA SITES https://sniperinmahwah.wordpress.com/2018/06/07/shortwave-trading-part-ii-faq-and-other-chicago-area-sites/ https://sniperinmahwah.wordpress.com/2018/06/07/shortwave-tr...
- _boffin_ 2y ago
  If you want even more fun reading, check out: http://www.nanex.net/aqck/aqckIndex.html http://www.nanex.net/aqck/aqckIndex.html It’s the only site I know of that has posts like it. Sadly, he hasn’t posted in awhile.
  - ycombobreaker 2y ago
    He fell off the rails when Trump was running for office. I remember being really disappointed to see the trading observations (and his own product advertisement) replaced by political rants.
theturtletalks 2y ago
Skywave has a point, they were through regulatory oversight to get their microwave working whereas these other firms went behind the FCC’s back and profited by not doing so. The fine is likely a lot lower than the profits they made so what incentive would future companies have to go through the proper channels?
brcmthrowaway 2y ago
Remember when HN was always HFT comp dick swinging contests? Would any top grad nowadays go to Jane Street over OpenAI or Anthropic?
- JumpCrisscross 2y ago
  > Would any top grad nowadays go to Jane Street over OpenAI or Anthropic? You’re measuring which part of the economy pays math majors best. If I had to trace the centre of gravity of my top former colleagues, it was banks and hedge funds (never Jane); Uber; some leakage to crypto, they never recovered; now AI.
- bubberducky 2y ago
  No, I doubt it. At the same time, OAI and Anthropic both hire waaay less people straight from undergrad whereas Jane Street (and similar) are a lot more realistic, and it's not like the pay is bad.
bob1029 2y ago
> Experimental licences have more bandwidth than commercial licences, allow for “frequency hopping” I think there is another angle to this where the modulation scheme makes a lot of the difference. If you figure out a way to send market information below the noise floor (i.e., spread spectrum schemes) how would anyone even know what you are doing? If I was operating an HFT firm I would be all-in on the "ask for forgiveness, not for permission" angle, because the politics around my business are really nasty.
- JumpCrisscross 2y ago
  > I would be all-in on the "ask for forgiveness, not for permission" angle, because the politics around my business are really nasty Securities are one of the few parts of the American economy regulated like a European sector. Complain-investigate regimes. Various agencies at multiple levels who can ban you from industry and fine you. The rational response is to turn risk tolerance down, not up.

61 points by throwaway2037 2y ago

why would a radiowave that is reflected off the atmosphere (and therefore taking the longer route) be faster than a direct fibre cable?

deleted 2y ago
[deleted]
scrlk 2y ago
Radio waves travel at nearly the speed of light, whereas light in an fiber optic cable travels at ~67% of the speed of light due to the refractive index of glass.
- cypherpunks01 2y ago
  Ericsson blog wrote: In a vacuum, electro-magnetic waves travel at a speed of 3.336 microseconds (μs) per kilometer (km). Through the air, that speed is a tiny fraction slower, clocking in at 3.337 μs per km, while through a fiber-optic cable it takes 4.937 μs to travel one kilometer – this means that microwave transport is actually 48% faster than fiber-optic, all other things being equal.
- JumpCrisscross 2y ago
  More bluntly: light in a fibre is still bouncing around a lot.
  - analog31 2y ago
    Not in single mode fibers, which still exhibit the effect. It's just about the refractive index of glass.
    - bcrl 2y ago
      Yes, even in single mode fibers light is bouncing around between the layers of glass with different diffraction indicies. The pulses just aren't dispersing while doing so.
- stephen_g 2y ago
  I worked for three years designing custom low-latency point-to-point microwave radios for HFT for this very reason. They didn't need very high bandwidths (their long-haul network was less than 200 Mbit, whereas in New York/New Jersey we had about 5 Gbps because the hops were much shorter and they had licenses for more RF bandwidth at a higher frequency). At those time scales, the difference is so large, it was incredible what they were willing to pay to build these networks!
  - scrlk 2y ago
    I somewhat regret not specialising in RF/comms in my EE degree - this side of HFT sounds like a fascinating line of work (Trading at the Speed of Light was a great read).
    - thijson 2y ago
      I doubt there's much here that's cutting edge. Any digital processing that's done in typical radio's to correct for channel impairments is avoided as it just adds latency. Meanwhile LTE is using as many digital techniques as possible to maximize bandwidth (MIMO, HARQ, OFMDA)
      - stephen_g 2y ago
        Haha, you got us :) - in terms of the digital side yes, kind of. We’d even try to not have any digital in the path if possible on some hops! We did have things like LDPC (and different FEC on control packets) but it was definitely not as complex as LTE or newer cellular or WiFi standards. But what was avoided digitally meant far more work going into the analogue side to improve SNR, dynamic range, NPR etc. through the signal chain.
FredFS456 2y ago
Speed of light in an optical fibre is about 2/3 that of the speed in air
_qua 2y ago
Light doesn’t go at light speed through optical fiber.
- AStonesThrow 2y ago
  By definition, it does, because the maximum speed is qualified by "the speed of light in a vacuum", so the speed of light [in other media] is simply a function of how much the medium slows it down, yet it is still the speed of light. Funny how that works!
- nimish 2y ago
  Sure it does. It's just that the speed of light in non-hollow optical fiber is slower than light in a vacuum. Microsoft bought a hollow optical fiber company for a reason.
  - cycomanic 2y ago
    Yes, funnily enough Microsofts reason was not HFT but AI. Essentially inter-datacentre training is limited by latency between the datacentres. Generally they want to build the datacentres close to metro areas, by using hollow core fibre the radius of where to place the data centres has essentially increased by 3/2. This significantly reduces land acquisition costs, and supposedly MS has already made back the acquisition cost for Lumenisity, through those savings.
    - 3eb7988a1663 2y ago
      That feels somewhat implausible. I assume a Microsoft sized data center starts at over $100 million. Moving the footprint X miles away might be cheaper, but is probably a drop in the bucket given everything else required for a build out. I would further assume that they were already some distance away from the top tier expensive real estate to accommodate the size of the facility.
      - donavanm 2y ago
        Its reality. Its generally about site and infra access, including power and fiber paths. The bigger providers (eg AWS) simply dont have more feasible sites that are within a few ms of the existing region DCs. Expect to see more infrastructure like “local zones” or AZs that are tens of ms away from the rest of the region.
indiosmo 2y ago
In addition to the radio signal being faster as noted by the other commenters, for long distances the radiowave is actually the shorter route. If you take one of the routes in the article, Chicago to Sao Paulo. The distance is about 8,400km in a straight line. According to https://en.wikipedia.org/wiki/Skywave https://en.wikipedia.org/wiki/Skywave a single shortwave hop can reach 3,500km, so 3 hops are required, or about 30ms. The shortest commercially available submarine cable between the US and Sao Paulo alone is significantly higher than that (almost double), and it comes out of the east coast, so you'd still have to factor in the latency between Chicago and New York. Even specialized low latency networks that mix wireless and fiber will still have much higher latency than the radio. The tradeoff is that shortwave radio has very little bandwidth so you're restricted to simple signals.

throwaway2037 2y ago

FT Alphaville: High frequency trading Skywave Networks accuses Wall Street titans of ‘continuous racketeering and conspiracy’ FT/Alphaville is blog attached to The Financial Times newspaper. It free to sign-up for an account.

brudgers 2y ago

https://archive.ph/2vQm6 https://archive.ph/2vQm6

biomcgary 2y ago

Other than seemingly perverse incentives, is there a good reason not to quantize trading time?

mikewarot 2y ago
I've argued in the past that we should have batch settlements every 30 seconds, instead of in real time. We don't really need microsecond based skimming/front running.
- biomcgary 2y ago
  30 seconds seems reasonable. Don't the markets themselves make a fair amount of money off of providing fast access to the HFTs? Is that the primary perverse incentive?
- Loughla 2y ago
  I've read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations. I'm with you. Every 30 seconds. Cap the power of connection speed in trading. Trading should be based on the value of the item being traded, not on how short the fiber run is.
  - mhmmmmmm 2y ago
    CLOB's force market participants to compete on pricing (which is only indirectly related to latency, since you can quote tighter if you know your orders won't get picked off by other, faster, traders) Taiwan used to have Batching style auction and it ultimately led to worse prices: https://focus.world-exchanges.org/articles/citadel-trading-auctions https://focus.world-exchanges.org/articles/citadel-trading-a... > Our analysis of the TWSE’s transition clearly demonstrates that continuous trading results in better liquidity provision, lower bid-ask spreads, more stable prices and enhanced price discovery, as well as higher trading volumes.
  - JumpCrisscross 2y ago
    > read the arguments that the microsecond trading serves a purpose that benefits all of us, but I fail to see how, even with the explanations What about an empirical argument? Microsecond trading reduces spreads and decreases volatility. It looks useless, so people try to regulate it away, and every time they do spreads widen and trading firms' and banks' profits fatten. > Every 30 seconds. Cap the power of connection speed in trading I'd go back to Wall Street if this happened: it would make market making profitable again.

spirobelv2 2y ago

mev but for tradfi

frinxor 2y ago

some fantastic older reading (2014): HFT in My Backyard https://news.ycombinator.com/item?id=8354278 https://news.ycombinator.com/item?id=8354278 https://news.ycombinator.com/item?id=8371852 https://news.ycombinator.com/item?id=8371852

ikmckenz 2y ago
Also, from the same blog: Shortwave Trading | Part I | The West Chicago Tower Mystery https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-trading-part-i-the-west-chicago-tower-mystery/ https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-tr... SHORTWAVE TRADING | PART II | FAQ AND OTHER CHICAGO AREA SITES https://sniperinmahwah.wordpress.com/2018/06/07/shortwave-trading-part-ii-faq-and-other-chicago-area-sites/ https://sniperinmahwah.wordpress.com/2018/06/07/shortwave-tr...
_boffin_ 2y ago
If you want even more fun reading, check out: http://www.nanex.net/aqck/aqckIndex.html http://www.nanex.net/aqck/aqckIndex.html It’s the only site I know of that has posts like it. Sadly, he hasn’t posted in awhile.
- ycombobreaker 2y ago
  He fell off the rails when Trump was running for office. I remember being really disappointed to see the trading observations (and his own product advertisement) replaced by political rants.

theturtletalks 2y ago

Skywave has a point, they were through regulatory oversight to get their microwave working whereas these other firms went behind the FCC’s back and profited by not doing so. The fine is likely a lot lower than the profits they made so what incentive would future companies have to go through the proper channels?

brcmthrowaway 2y ago

Remember when HN was always HFT comp dick swinging contests? Would any top grad nowadays go to Jane Street over OpenAI or Anthropic?

JumpCrisscross 2y ago
> Would any top grad nowadays go to Jane Street over OpenAI or Anthropic? You’re measuring which part of the economy pays math majors best. If I had to trace the centre of gravity of my top former colleagues, it was banks and hedge funds (never Jane); Uber; some leakage to crypto, they never recovered; now AI.
bubberducky 2y ago
No, I doubt it. At the same time, OAI and Anthropic both hire waaay less people straight from undergrad whereas Jane Street (and similar) are a lot more realistic, and it's not like the pay is bad.

bob1029 2y ago

> Experimental licences have more bandwidth than commercial licences, allow for “frequency hopping” I think there is another angle to this where the modulation scheme makes a lot of the difference. If you figure out a way to send market information below the noise floor (i.e., spread spectrum schemes) how would anyone even know what you are doing? If I was operating an HFT firm I would be all-in on the "ask for forgiveness, not for permission" angle, because the politics around my business are really nasty.

JumpCrisscross 2y ago
> I would be all-in on the "ask for forgiveness, not for permission" angle, because the politics around my business are really nasty Securities are one of the few parts of the American economy regulated like a European sector. Complain-investigate regimes. Various agencies at multiple levels who can ban you from industry and fine you. The rational response is to turn risk tolerance down, not up.