4 ms·

How important is physical proximity, really? An electrical signal can travel 186 miles in a millisecond. So locate the servers in cheaper real estate 10 miles

by mtraven 17y ago

How important is physical proximity, really? An electrical signal can travel 186 miles in a millisecond. So locate the servers in cheaper real estate 10 miles away an you lose like about .1 millisecond round-trip. If that really makes a difference in trading success something is really screwed up.

spectre 17y ago
The latency in the network has more to do with the networking equipment than the transmission speed. Also routing can often cause longer return times and dropped packets. Paying the high price ensures that their transactions don't leave the building and all of the equipment in the middle is optimised for that type of operation. The only other solution would be 10 miles of dedicated fibre through a metropolitan area. Not a cheap solution.
sam_in_nyc 17y ago
>>How important is physical proximity, really? First off, high frequency traders are making their money off of how quickly they react to the market conditions. The quicker they react, the more money they make. In this sense, if they trade at high enough volume, it's worth paying more for a lower latency. This is, of course, assuming they are good at what they do. If they are bad at what they do, a lower latency wouldn't harm. Second, they are in a competitive environment. If they want to make money off of obvious arbitrages that their competitors are likely engaged in as well (very likely in the forex market), they need to react first. I assume that physical proximity reduces latency in ways other than the time it takes for photons to travel through fiber optic cable, for example router hops. >> On: Trading success based on latency In Forex (the currency exchange), there are sometimes very obvious arbitrage opportunities. You can take your Dollar, and trade it into Euros. Then, go from Euros to Yen. Then, go from Yen back to Dollar -- and end up with more dollars than you started with! Of course, after a certain amount of money flows through, the market will adjust itself and the arbitrage will vanish. Being the first to react to this arbitrage allows you to realize and profit from the arbitrage before anybody else does.

by mtraven 17y ago

spectre 17y ago

The latency in the network has more to do with the networking equipment than the transmission speed. Also routing can often cause longer return times and dropped packets. Paying the high price ensures that their transactions don't leave the building and all of the equipment in the middle is optimised for that type of operation. The only other solution would be 10 miles of dedicated fibre through a metropolitan area. Not a cheap solution.

sam_in_nyc 17y ago

>>How important is physical proximity, really? First off, high frequency traders are making their money off of how quickly they react to the market conditions. The quicker they react, the more money they make. In this sense, if they trade at high enough volume, it's worth paying more for a lower latency. This is, of course, assuming they are good at what they do. If they are bad at what they do, a lower latency wouldn't harm. Second, they are in a competitive environment. If they want to make money off of obvious arbitrages that their competitors are likely engaged in as well (very likely in the forex market), they need to react first. I assume that physical proximity reduces latency in ways other than the time it takes for photons to travel through fiber optic cable, for example router hops. >> On: Trading success based on latency In Forex (the currency exchange), there are sometimes very obvious arbitrage opportunities. You can take your Dollar, and trade it into Euros. Then, go from Euros to Yen. Then, go from Yen back to Dollar -- and end up with more dollars than you started with! Of course, after a certain amount of money flows through, the market will adjust itself and the arbitrage will vanish. Being the first to react to this arbitrage allows you to realize and profit from the arbitrage before anybody else does.