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How Microwave Transmission Is Linking Financial Centers At Near-Light Speed

timothy posted about 5 months ago | from the faster-than-you-can-read dept.

Networking 236

The L.A. Times has a short but compelling article about the state of the art (and coming state of the art) in dedicated networking technology in one of the applications where you'd expect the customers to care most about it: connecting financial trading centers. Milliseconds count, and the traders count milliseconds. From the article, one example: "[New York-based networking company] Strike, whose ranks include academics as well as former U.S. and Israeli military engineers, hoisted a 6-foot white dish on a tower rising 280 feet above the Nasdaq Stock Market's data center in Carteret, N.J., just outside New York City. Through a series of microwave towers, the dish beams market data 734 miles to the Chicago Mercantile Exchange's computer warehouse in Aurora, Ill., in 4.13 milliseconds, or about 95% of the theoretical speed of light, according to the company. Fiber-optic cables, which are made up of long strands of glass, carry data at roughly 65% of light speed."

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236 comments

Old News (0)

Anonymous Coward | about 5 months ago | (#45565297)

Isn't this a repeat?

Re:Old News (1)

Anonymous Coward | about 5 months ago | (#45565351)

Isn't this a repeat?

You can say that again.

Re:Old News (0)

Anonymous Coward | about 5 months ago | (#45565885)

Isn't this a repeat?

The wasting time and energy trope -- marketers wanting their version of first post -- just so that some employees of a glorified casino can be first bet.

Re:Old News (1, Informative)

hcs_$reboot (1536101) | about 5 months ago | (#45566121)

Kind of, but it's interesting to see how progress was generated before from wars, and nowadays progress comes from the financial world. This is were power is, now.

God knows (-1, Flamebait)

TempleOS (3394245) | about 5 months ago | (#45565325)

God has fore-knowledge that resembles time travel when you see it. C:\TAD\Text\QUIX.TXT and published them with a preface, worth the book it introduces tenfold, in which he gives an account of the early Spanish stage, and of his own attempts as a dramatist. It is needless to say they were put forward by Cervantes in all good faith and full confidence in their merits. The reader, however, was not to suppose they were his last word or final effort in the drama, for he had in hand a comedy called "Engano a los ojos," about which, if he mistook not, there would be no question. Of this

Re:God knows (4, Funny)

EdIII (1114411) | about 5 months ago | (#45565373)

Whatever you're smoking please share.

Re:God knows (1, Interesting)

Anonymous Coward | about 5 months ago | (#45565463)

That's Terry Davis. He's not smoking anything. He has schizophrenia. (Seriously, look him up; God sings songs to him about the CIA and Indians through his OS.)

Re:God knows (-1, Offtopic)

evilviper (135110) | about 5 months ago | (#45565727)

He's not smoking anything. He has schizophrenia.

I have schizophrenia, and yet I'm still smoking something...

Why can't Terry?

Re:God knows (0)

Anonymous Coward | about 5 months ago | (#45565567)

I think this is similar to a lot of "generated" websites I have been coming across lately. They string groups of words together that are similar in nature, but the end result is complete gibberish. Here is an example I found when searching how to import an old bitcoin wallet I found from a old system backup: http://sancorrado.it/wp-content/themes/twentytwelve/inc/bitcoin.org.pl/bitcoin-qt-import-wallet.dat.php [sancorrado.it]

Just in case the site goes down (though you can find plenty of these for just about any subject):
"While safe bitcoin qt import wallet.dat characters are actually only migrant it is more convenient and such to model modified authorities. Right and a deterministic bitcoin qt import wallet.dat to governor andrew m. manchin's medieval scholarship of the sago football announcement may have enhanced his phone. "

Another at http://bitcoinrobots.org/bitcoin-qt-import-wallet-dat-2/ [bitcoinrobots.org]

"Bitcoin Value To Us Dollar
  • I discovered the highest resistant wax layer that is seven different instincts even if that provides so much knowledge
  • The only bad things look at bicoin mining
  • You must make some sacrifices and former Peace Corps volunteer introduced a complex strategy
  • Rick Perry made them happy
  • I believe the explanations detailing how you some true facts in answer of you question that Can you read it carefully
  • "

Re:God knows (2, Funny)

toygeek (473120) | about 5 months ago | (#45565659)

Its the latest literary craze: eat two cans of alphabet soup and then forcefully vomit it onto a high contrast flat surface, take a high resolution photo of it and then run it through OCR from 1999. Tada! Instant classics the whole family can enjoy.

Re: God knows (0)

Anonymous Coward | about 5 months ago | (#45566155)

Apparently someone is having fun with a Markov chain generator on the Intertubes...

But (3, Informative)

rossdee (243626) | about 5 months ago | (#45565365)

There was a story a few weeks ago about someone in Chicago that had a faster than light connection (when the Fed issued a statement about interest rates)

Re:But (1)

Anonymous Coward | about 5 months ago | (#45565437)

I hope financial trading centers lose 95% of their wealth at 100% of the speed of light. Fuck them.

Re:But (3, Interesting)

Anonymous Coward | about 5 months ago | (#45565491)

Time for somebody to put up some tall, shiny aluminum billboards on rural estate along a certain 734-mile path...

Re:But (4, Interesting)

Z00L00K (682162) | about 5 months ago | (#45566171)

To avoid this the trade system should delay all transaction with a random factor between 10 and 20 minutes. That should make microtrading completely useless.

Re:But (0)

AlphaWolf_HK (692722) | about 5 months ago | (#45566333)

Why are we in such a need to kill a practice that is rapidly speeding up the development of the next technology frontier?

Maybe it's just me being obsessed with networking, but I think all of the stuff they've done to shave milliseconds and increase available bandwidth is damn impressive. I'm also damn impressed with what seems to be the world's first layer 7 switch - created for this purpose no less.

Hell, forget development for a second, look at the big pipes that have been added all throughout the world to increase the global network capacity all in the name of making high frequency trading even faster. Sure, it doesn't help the last mile, but what good is the last mile if the backbone is weak? Now we have a very good backbone largely thanks to this.

Don't know about you guys, but I really love what capitalism has done here. Maybe I'm not bothered by it because I don't trade stocks, but even if I did I'm not sure I'd balk about a few cents extra per trade in light of this.

Re:But (1)

Z00L00K (682162) | about 5 months ago | (#45566385)

This isn't the only driver for faster and better networks, but you also need to look who's paying for it - it's all the small time savers that can't afford such a system.

Re:But (2, Interesting)

pepty (1976012) | about 5 months ago | (#45566465)

Just accumulate all of the orders for one second. At the end of each second match the closest buy/sell orders to each other and execute the trades. Repeat.

Nothing "near" about it (1, Informative)

belg4mit (152620) | about 5 months ago | (#45565371)

Light speed in glass is less than that in air, which is less than that in vacuum. But the light (infrared, microwave, your favorite color) is still travelling at light speed.

Re:Nothing "near" about it (1)

ModernGeek (601932) | about 5 months ago | (#45565457)

Yes, because it's bouncing off of particles and such, however they are measuring the speed at which the signal meets the other end in a point-to-point scenario.

Which begs the question, how much faster would fiber optics be without air in the line? I imagine it would be negligible, but it would be nice to know.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565507)

multiple layers of protocols affect the speed of most fiber optic networks more than the speed of light through glass

Re:Nothing "near" about it (1)

Shavano (2541114) | about 5 months ago | (#45565545)

That's why the big boys lay dedicated fiber.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565609)

if I remember correctly, most networks use
SONET
ATM
TCP/IP
Ethernet
which includes a high cost for converting large ethernet packets to tiny ATM packets

companies like Level3 have been talking about Ethernet on glass for a long time, but I have not heard much about it lately

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565525)

fiber optics don't have air in the line. It's electromagnetic effects anyways that slow the light in fiber compared to air or vacuum. Optics 101.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565539)

how much faster would fiber optics be without air in the line?

Light is faster in air than in glass.

Re:Nothing "near" about it (2, Informative)

Mr Z (6791) | about 5 months ago | (#45565637)

Raises the question, maybe, but it certainly does not beg the question. [quickanddirtytips.com]

In any case, the speed of light in fiber optics is dominated by the glass or plastic, not any air that might be somehow still be in the fiber. So far as I know, that quantity is zero or close enough at least. For fiber optics to work, you need total internal reflection [wikipedia.org]. To get total internal reflection over a decent range of angles (so that you can actually bend your fiber optic cable), you needs a sufficiently high index of refraction. It turns out that the higher the index of refraction, the slower the speed of light in the medium. [wikipedia.org]

Re:Nothing "near" about it (5, Funny)

davester666 (731373) | about 5 months ago | (#45565731)

the next guy up will put up a series of dead-straight tubes, that they can create a vacuum in, then pass the microwaves through the tubes, just to get 97% of the speed of light.

and of course, he will also be able to claim a patent on transmitting the internet through a series of tubes.

Re: Nothing "near" about it (1)

thermowax (179226) | about 5 months ago | (#45565895)

Amusingly, if you go to the Smithsonian Museum of Technology (iirc) there is/was a display of some Bell Labs stuff where they were (until fiber immediately- at the time- made it obsolete) doing *exactly that*. Little 1cm or so tubes, carefully soldered together, to form microwave waveguides.

I bet you could pick that patent up for cheap... er, maybe not any more.

Re: Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45566277)

No need to go to the Smithsonian, any physics department at a university is going to have piles of waveguides. Considering all the different sizes they come in and that depending on the research going on in the department, there is usually quite a bit of the stuff clogging up storage in the unneeded sizes from former workl.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565459)

You can't ignore the time it takes for intermediate towers to retransmit the signal. And, correctly, they don't ignore that.

Re:Nothing "near" about it (4, Informative)

Pseudonym Authority (1591027) | about 5 months ago | (#45565489)

Nope, nope, nope. The speed of light is c, the speed of light in various materials is denoted as factors of c (0.65c or 0.99999c).

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565743)

no, the speed of light is always the speed of light. the speed up light in a medium is ... the speed... of the light.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45565893)

.. in the medium. Now stop being a dense dumbfuck and finish your high school physics.

Re:Nothing "near" about it (2)

drkim (1559875) | about 5 months ago | (#45566329)

no, the speed of light is always the speed of light. the speed up light in a medium is ... the speed... of the light.

You are correct sir.

It's those lazy-ass science folks that always forget to append:

"The speed of light ...in a vacuum. "

Re:Nothing "near" about it (3, Informative)

Trogre (513942) | about 5 months ago | (#45566397)

The speed of light in a vacuum is c. Otherwise you are correct.

Look up cherenkov radiation for a cool example of particles exceeding the speed of light in the local medium.

Re:Nothing "near" about it (0)

Anonymous Coward | about 5 months ago | (#45566613)

Since when is incorrect content +5 Informative? The speed of light IN VACUUM is c.

Mod parent up: it's called VELOCITY FACTOR, folks! (3, Informative)

storkus (179708) | about 5 months ago | (#45565861)

For some place that's supposed to be for nerds who, unlike me, finished college, this discussion is embarrassing. Parent post and 1 or 2 other posts have it right, and this is something that every radio guy knows as well.

Wikipedia references: http://en.wikipedia.org/wiki/Velocity_factor [wikipedia.org]
More general discussion with heavy math: http://en.wikipedia.org/wiki/Group_velocity [wikipedia.org]
The reason for it all: http://en.wikipedia.org/wiki/Refractive_index [wikipedia.org]
This is straight from the horse's mouth: http://www.corning.com/WorkArea/downloadasset.aspx?id=39403 [corning.com]

Re:Mod parent up: it's called VELOCITY FACTOR, fol (2)

Nemyst (1383049) | about 5 months ago | (#45566143)

Light speed, without any qualification after it, is generally accepted to mean c, celeritas. Adding "in a vacuum" is a pointless waste of space and only serves to confuse people who do not know, nor care, about the difference.

It's amusing though how there's always at least one pedant "correcting" the article or summary in each and every article with that short-form term in it.

Re:Mod parent up: it's called VELOCITY FACTOR, fol (1)

nbauman (624611) | about 5 months ago | (#45566543)

It's amusing though how there's always at least one pedant "correcting" the article or summary in each and every article with that short-form term in it.

I literally want to kill those people.

Improving the lives of ordinary citizens (2, Interesting)

Anonymous Coward | about 5 months ago | (#45565383)

Every day Slashdot should have one story that features a technological advance which could improve the daily lives of ordinary citizens.

This isn't the one.

Re:Improving the lives of ordinary citizens (1)

locopuyo (1433631) | about 5 months ago | (#45565421)

Less delay in communication devices improves the lives of ordinary citizens.

Re:Improving the lives of ordinary citizens (3, Insightful)

Anonymous Coward | about 5 months ago | (#45565445)

Only if not used to take advantage over said ordinary citizens.

Re:Improving the lives of ordinary citizens (1)

mrbluze (1034940) | about 5 months ago | (#45565495)

Less delay in communication devices improves the lives of ordinary citizens.

For example, the gun was an improvement on the bow and arrow, both of which communicate the same message. There are certain uses of this technology that would dramatically improve the lives of ordinary citizens.

Re:Improving the lives of ordinary citizens (0)

Anonymous Coward | about 5 months ago | (#45565613)

It's not enough that a computer can run Crysis on max settings, but a sub 100ms ping is also needed to for accurate sniping, oh yeah and all that financial and science stuff too.

"Every day Slashdot should have one story that features a technological advance which could improve the daily lives of ordinary citizens."

Really that kind of low brow, short sighted, MSN progressive taking points attitude towards advancements should be corrected at birth with a simple genetic test and the liberal application of a pillow. The same people cry about about spending money on space programs, the military, personal transportation (aka the car), elective surgery, pet health care, etc. Personnally I don't want to sit around in the dirt eating fire roasted rat telling stories as a lifestyle because frankly that is all anyone actually "needs".

I want my spaceships, enhanced boobs, my best fury friend to live for 2 more years, a military that might stand a chance when the aliens show up (and whoop the crap out of everyone Earthside in the meantime) and I want my eTrade to go through .00001 seconds faster, even if that means the money is not spent on getting the people sitting around the fire in some 3rd world hole, eating roasted rat a vacine shot and extra rat to eat every third Wednesday of the month.

Can go somewhat faster... (4, Interesting)

Thagg (9904) | about 5 months ago | (#45565397)

Sending a neutrino beam through the earth will be faster than taking the great-circle route across the surface of the earth.

Of course, one would have to send a ridiculously large number of neutrinos to be sure to have them detected, but that's just an engineering problem.

Re:Can go somewhat faster... (1)

mattie_p (2512046) | about 5 months ago | (#45565687)

I wish I had mod points right now, I could not bump this fast enough.

Eventually it will happen, due to the increasing financial costs of not having essentially real time communications between huge centers of finance.

Re:Can go somewhat faster... (0)

Anonymous Coward | about 5 months ago | (#45565891)

yours is an excellent idea, and it's easier than you make it out to be. there are already a ridiculously large number of neutrinos poised to pass through the earth at any given moment, you simply need to modulate this beam.

Neutrino Factory (1)

joe_frisch (1366229) | about 5 months ago | (#45566481)

Well there is a plan to build a neutrino factory that would create directional highly intense neutrino beams. While the goal is neutrino physics, it could be used as a transmitter. Its only ~$1B, maybe worth it to the financial guys. If they pay, they can have have 50% of the beam time.....

Dodgy Customers (4, Insightful)

mrbluze (1034940) | about 5 months ago | (#45565409)

here you'd expect the customers to care most about it:

Yeah, and what customers? Electronic trading supercomputers.

None of this makes a difference to honest trading except to ensure its loss making properties.

Re:Dodgy Customers (3, Insightful)

Anonymous Coward | about 5 months ago | (#45566031)

Traders with ultra fast computers place orders at a fixed price. If no one nibbles immediately and they can't make a profit in a few milliseconds, the order is cancelled. The current system makes "traders" very rich because they "cheat" legally.

Re:Dodgy Customers (2, Informative)

girlintraining (1395911) | about 5 months ago | (#45566105)

None of this makes a difference to honest trading except to ensure its loss making properties.

I think I see a flaw in your cunning argument: First, all trades are honest as long as it is not made under duress. And any macroeconomic teacher will tell you that in a trade both people get something they want, so the more trade you have, the better the economy is. People are operating under a wide variety of misconceptions regarding high speed trading, and only a few of the criticisms are valid. High speed trades mean that the value of a given stock or financial offering is much closer to the line where supply and demand cross. It results in less money being wasted either because the price is too high, or too low. What high speed trading does, in essence, is reduce the delta. Conceptualize a curved line, and then consider a number of equally-spaced rectangles under each approximating the volume of the curve. The more rectangles you have, the more accurate you can recreate that curve. High speed trading simply improves the delta of the supply and demand curves, so that the spread above and below the point where supply and demand cross is very small.

People get confused between high frequency trading and algorithmic trading. High frequency trading carries benefits for both buyer and seller. Algorithmic trading, on the other hand, can and has resulted in huge losses. Like most algorithms exposed to unexpected input, they behave erratically and in unanticipated ways, and once one algorithm goes off the rails, as it were, it can lead to a cascade failure where different financial agents within the system also see something that was unanticipated and then in turn fail. Because these algorithms control a lot of different financial products, these cascade failures can spread and crash entire markets, dozens of stocks, etc.

There are valid criticisms for algorithmic trading. I see none for high speed trading, however. And I do not know why people banter about about "dishonest" trading -- the trades themselves are public record, and only executed because the seller and buyer agreed on a price. There is no coercion or manipulation in the trade itself. The dishonesty in the system comes in over or under-valuation of a financial instrument, or from insider trading. This is external to the trade system itself, and comes from people using information not publicly available, or from deceptive accounting practices.

But here again, the algorithms themselves, nor the computers executing trades, are responsible, and using them is neither dishonest nor something that "only the rich" can afford to do; Sites like e-trade offer consumers a wide variety of tools which can execute high speed trades when various conditions in the market occur, such as the price rising above, or falling below, certain points, and these systems are available for use by the everyday person for reasonable fees. The dishonesty in the system is largely on the CEOs, senior management, and accountants, who collude to profit at others expense.

It has nothing whatsoever to do with the systems themselves, and I really wish people would stop spreading the idea that there's this mythical beast living in data centers in New York gobbling up poor people's money -- those live in the Penthouse, not the basement.

Re:Dodgy Customers (2, Insightful)

Anonymous Coward | about 5 months ago | (#45566187)

Shilling hard for Goldman Sachs are we?

People get confused between high frequency trading and algorithmic trading.

A distinction without a difference. High frequency trading requires algorithmic trading otherwise it can't match the fluctuations in price.

I see none for high speed trading

Valueless arbitrage. Buyer and seller would have met if not for the middleman leeching off both.

There is no coercion or manipulation in the trade itself.

What about when the traders fuck up, why is it they can ask NASDAQ et. al. to roll the trades back but I can't?

Re:Dodgy Customers (1)

khallow (566160) | about 5 months ago | (#45566449)

makes a difference to honest trading

But is this trading Truly Scottish? That's the real dilemma here!

I agree with the other replier. If the trading is legal, then it is honest.

Re:Dodgy Customers (1)

blue trane (110704) | about 5 months ago | (#45566533)

It's honestly taking advantage of market inefficiencies to profit without contributing any value. It was legal for Magnetar to sell RMBS that they had long CDS positions on, without telling the buyer that.

Quantum Entanglement Please..... (0)

Anonymous Coward | about 5 months ago | (#45565433)

...so I can write "first".

Re:Quantum Entanglement Please..... (1)

grcumb (781340) | about 5 months ago | (#45565741)

...so I can write "first".

I already did that, only I had to go and look, and it turned out I didn't....

... in this universe.

"and the traders count milliseconds" (5, Insightful)

superdude72 (322167) | about 5 months ago | (#45565449)

The fact that the traders count milliseconds is proof that they are just scam artists. Parasites, producing nothing of value. High-speed trading is nothing but a mechanism for funneling money to the rich from everyone else.

Re:"and the traders count milliseconds" (4, Funny)

femtobyte (710429) | about 5 months ago | (#45565511)

but... but.. liquidity! Businesses need to be able to make decisions to respond to market needs on 4.13 millisecond timescales! Imagine how much economic damage there would be if the Job Creators had to wait a whole 6 milliseconds (at fiber-optic speeds) for their decisions to take effect!

Re:"and the traders count milliseconds" (1)

Anonymous Coward | about 5 months ago | (#45565693)

I know right? I love that bullshit liquidity argument. There are no worthwhile liquidity gains from doing shit at that speed, vs even 10x or 100x of that. It's fucking bullshit and I can't help but snort with derision whenever I see some wallstreet dickhole or wallstreet dickhole apologist actually try to claim that shit with a straight face. It's fucking laughable.

Re:"and the traders count milliseconds" (0)

Anonymous Coward | about 5 months ago | (#45565601)

I can see some utility from arbitrage - high frequency traders even out prices essentially which is the legitimate foundation of capitalism. The measures seem a bit extreme but the diminishing returns of HFT seems to imply some real utility.

Re:"and the traders count milliseconds" (1, Informative)

blue trane (110704) | about 5 months ago | (#45565667)

Market-making dealers push prices away from their efficient levels, as even Fischer Black noted. From Perry Mehrling's Lecture 22 Notes [cloudfront.net], in his Economics of Money and Banking, Part Two [coursera.org] MOOC:

On Monday, December 30, 1985, Fischer gave the presidential address to the American Finance Association which was meeting in New York, and stunned his audience with the following words:

“We might define an efficient market as one in which price is within a factor of 2 of value; i.e. the price is more than half of value and less than twice value. By this definition, I think almost all markets are efficient almost all of the time. ‘Almost all’ means at least 90 percent.”

Here we can detect, I think, the influence of Fischer Black’s friend, Jack Treynor, who had originally introduced him to his own version of the capital asset pricing model but gone on to a life in the markets rather than academia, and in that life had produced the dealer model that we have been using in previous lectures. Think about what the dealer model says. It says, just as Fischer relates, that the price of a security fluctuates within bounds set by the value based trader, bounds that can be rather far from true value. At any moment in time, the price of the security will lie somewhere within those bounds, exactly where depends on the inventory of the dealer.

Dealers profit by exploiting market inefficiencies, and pushing prices away from their efficient levels, within a factor of 2. So if the efficient level of a barrel of oil is $100, the dealers can push the price down to $50 or up to $200. That's a pretty wide margin of error.

Re:"and the traders count milliseconds" (0)

Rockoon (1252108) | about 5 months ago | (#45566275)

A key part of learning is understanding the material. You didn't.

Re:"and the traders count milliseconds" (1)

blue trane (110704) | about 5 months ago | (#45566509)

Quoting from Lecture 10 Notes [cloudfront.net]:

The modern theory of finance is built on the assumption of perfect liquidity, so that prices can be
fully efficient. It is supposed to be arbitrage that creates perfect liquidity by entering to take
advantage of even the smallest deviation. To say that liquidity is perfect is to say that liquidity is
a free good.

But in a fully efficient market, arbitrage would not be profitable since all bets would be
fair bets. So position takers would not make money. And if position takers do not make money,
they will not compete so much for the market-making business.

So let's make liquidity a free good. Then you don't even have to regulate dealers. They'll just wither away...

Re:"and the traders count milliseconds" (1)

diamondmagic (877411) | about 5 months ago | (#45566389)

I appreciate Black's contributions to our understanding of modern pricing, but here I have no clue what he's talking about. The basis of all modern economics since Carl Menger is the law of marginal utility, which implies the subjective theory of value. I can't tell what is meant by "value" here but it's certainly not in the meaning of virtually all economics for the past century.

That's not the definition of efficiency, since efficiency too is subjective [econlib.org]... Black is describing one possible method of evaluating efficiency, which like any, is completely arbitrary.

Re:"and the traders count milliseconds" (2)

blue trane (110704) | about 5 months ago | (#45566491)

Quoting from Mehring's Notes for Lecture 10 [cloudfront.net], in Economics of Money and Banking, Part One [coursera.org]:

In financial theory, it is common practice to assume perfect arbitrage, and hence also
complete liquidity. Assets are assumed to trade at their fundamental value since any other price
would create an arbitrage profit opportunity. In effect, the world that the finance theorists
imagine is a world in which the VBT outside spread is very very narrow, so there is no room and
no need for dealers. In the real world, the outside spread is quite wide, dealers offer prices inside
that spread but the prices can deviate very far from fundamental value. That is the world Fischer
Black was talking about in his infamous presidential address to the American Finance
Association when he said that he thought markets were efficient, meaning price was usually
within a factor of two of true value.

We can understand what Black is saying by referring back to the Treynor model.
Suppose that fundamental value is the price that dealers would quote if their inventories were
exactly zero, so they are not exposed to any price risk. The Treynor model then shows how
market making by dealers pushes price away from fundamental value, on one side or another, by
more or less depending on the size of the outside spread and the dealer’s maximum long and
short position limits. Standard asset price theory abstracts from this effect, in effect treating the
outside spread as collapsed around fundamental value, so there is no need for dealers. Some
markets are close approximations to this, but others are not; some times are close approximations
to this, but others are not.

If efficiency is completely arbitrary, then the prices that high-frequency traders even out, which the post I was responding to hailed as the legitimate foundation of capitalism, are based on what? They're just pushing prices around to make a profit. Why is that "legitimate"?

Dealers profit from the general lack of liquidity. Wouldn't it be better if a "public option" existed, which provided liquidity without a profit motive? You wouldn't have to regulate dealers; just provide another option which worked in the public interest, pushing prices lower than dealers alone will.

Re:"and the traders count milliseconds" (1)

khallow (566160) | about 5 months ago | (#45566469)

Parasites, producing nothing of value.

Liquidity and all the other usual counter-reasons you hear, but fail to recognize.

High-speed trading is nothing but a mechanism for funneling money to the rich from everyone else.

Yea, right. Don't do market orders or stop loss orders. Just do limit orders. Now, you're immune to high frequency trading, because you aren't doing high frequency trading yourself.

Why? Because micowaves aren't "light"? (0)

Anonymous Coward | about 5 months ago | (#45565451)

I think you'll find that they actually travel at lightspeed, just not lightspeed through a vacuum (as they're not travelling through a vacuum).

Pedantic? yes, a little, but as a method of keeping the general scientifically interested reader confused and thinking that such stuff is well beyond their understanding, this headline is a step backwards in the promotion in one of the most remarkable breakthroughs in human understanding methinks.

Re:Why? Because micowaves aren't "light"? (1)

amRadioHed (463061) | about 5 months ago | (#45566403)

Not pedantic, wrong. It seems obvious to me that what they mean by a fraction of light speed is how far they are from the theoretical fastest communication speed from point a to point b where the speed of light is the only delay. Fiber has many additional delays caused by numerous repeaters along the way and the circuitous routing of the cable. They have improved on this with a more direct path and fewer repeaters.

Blimp in Middle attack? (5, Funny)

runeghost (2509522) | about 5 months ago | (#45565483)

Step 1: Intercept the transmisson Step 2: ??? Step 3: Profit!

Re:Blimp in Middle attack? (0)

Anonymous Coward | about 5 months ago | (#45565565)

Or chaff in the middle -dos, steampunk turbine wins again?

Cloud in Middle attack (1)

slew (2918) | about 5 months ago | (#45565573)

Step 1: Determine when a competing trader is in the most vulnerable position
Step 2: Seed clouds to start a weather pattern that reduces bandwidth of the microwave relay
Step 3: ???
Step 4: Profit!

Hot Pocket in the Middle Attack (2)

Calavar (1587721) | about 5 months ago | (#45566083)

Step 1: Rent an apartment across the street from the stock exchange
Step 2: Cook delicious hot pockets in the microwave while the interference messes with the traders' signals
Step 3: ???
Step 4: Eat delicious hot pockets

News? Well, interesting perhaps... (4, Interesting)

rusty0101 (565565) | about 5 months ago | (#45565557)

Considering the Nova episode 'making things faster' with David Pouge as the host presented this over a month ago, and they have production lead time delayse amounting to months, I'm with the people suggesting that this is a repeat. And hardly qualifies as 'news'.

That said, cool.

Also noted in the Nova episode was that the physical path that the fiber-optic route takes is going to be longer than the path that the microwave route takes.

If they are not doing it already, I would suspect that the next step will be to move the repeater electronics up to the microwave dishes at the intermediary locations. My experience with telcom is that this is usually housed in the shelter at the base of the towers, however if they can locate it with the dishes it will eliminate a path distance of at least twice the sum of the elevations of the dishes, divided by the velocity factor of the media they use to connect those, (roughly 1 for dry waveguide, and usually between .6 and .9 for different varieties of co-ax media.) It's not a lot, but if they are looking to eliminate every possible delay, that's got to be in their plans.

Re:News? Well, interesting perhaps... (4, Interesting)

Anonymous Coward | about 5 months ago | (#45565971)

Already done some years ago. Dish has redundant modules on the back that only need power and cat 5 for ip down. Cross connect across tower legs on same tower to the next dish and go

95% efficient solution. 19us per relay. (0)

Anonymous Coward | about 5 months ago | (#45566605)

734 miles = ~1181km
speed of light in a vacuum: 299,792km / s
speed of light in air: 299,705km/s
= 3.94ms to travel from NYC to Chicago.
Time quoted in article: 4.13ms
Relay cost: 0.19ms (190us)
Efficiency of solution: 95%

To cope with curvature of the Earth, you're looking at about 10 relays (possibly more or less depending on their height).
If it were 10, that's 19us per relay.
That's pretty damn good.

Don't know why (0)

Anonymous Coward | about 5 months ago | (#45565671)

Having had a microwave ds3 at one of my previous jobs, don't know why they would bother, it's not vey reliable, eventually we ditched it for good ole wired connections

Re:Don't know why (0)

Anonymous Coward | about 5 months ago | (#45566475)

Unlike the ds3, this link produces delicious fried birds as an additional bonus for the best performing traders.

Leeches (1)

Anonymous Coward | about 5 months ago | (#45565685)

Lets be clear, none of these microtraders actually add anything to the economy. All they do is take a percentage cut from every transaction they manage to wedge themselves into.

Leeches all of them.

Local silicon beats microwave everytime (4, Interesting)

Anonymous Coward | about 5 months ago | (#45565761)

The high speed trading field is bein geviscerated by the placement of FPGA based devices on fiber leaving the building. There's no point ot a "high speed link", with all the insanity involved in that technology, when you can program a sophisticated monitor and sales control tool right outside the stock exchange.

Now, the center that analyzes the history of such data and builds your models of how to respond can be in another state and pre-program the FPGA. But these devices are already being used: It took me twenty minutes to stop laughing at a job interview with one such company: I was unsure just which of my talents they wee interested in until I noticed a display of such devices, and realized they wanted me to assist in their migration to a much, much cheaper part of the country for all their modeling and analysis tools, and just leave a box or two of Nallatech FPGA cards at the New York Stock Exchange.

It was amazing how fast they put the NDA in front of me when I explained the implications to their core business model, and started tying it to the repercussions of moving *away* from the human contacts that provide back channel, essentially insider knowledge, when the analysis boxes are no longer in the data center with your own staff on site. My speculative "if you need to tune these models manually, you need to secure the information, and who is allowed to change that model? how do you manage the provenance of such orders" discussion apparently set off alarm bells that urged them to get me under an NDA, whether or not they ever made an offer. Life got really adventuresome when I refused to sign an NDA without an offer on the table.

Re:Local silicon beats microwave everytime (1)

smellotron (1039250) | about 5 months ago | (#45566167)

There's no point ot a "high speed link", with all the insanity involved in [FPGAs]

Do that for a day, and then come back and tell us how you fared. Local silicon in New York doesn't do squat when the best information is coming from Chicago, London, or Tokyo.

Trading on non-public information (0)

Anonymous Coward | about 5 months ago | (#45565925)

If a trade occurs in Chicago before news of an event in New York could have reached the entire 50 states at the speed of light, the information was not "public" in any sense. So these folks are violating securities laws by trading based on non-public information.

All this effort for parsitism (3, Insightful)

dbIII (701233) | about 5 months ago | (#45565973)

It looks like another symptom of why China is going to kick our ass. All this effort put into getting crumbs from what other people do instead of doing something tangible.

Re:All this effort for parsitism (2)

blue trane (110704) | about 5 months ago | (#45566035)

What does China do again? Provide cheap labor? 3D printing will eliminate that advantage.

Re:All this effort for parsitism (1)

pepty (1976012) | about 5 months ago | (#45566531)

What does China do again? Provide cheap labor? 3D printing will eliminate that advantage.

China Provides cheap labor, lax environmental and zoning restrictions, entire cities organized around particular industries ... 3D printing is a very expensive and very slow way to manufacture pieces of plastic or metal in small quantities. If it was a fast and inexpensive way to make things by the gross they would make things that way in China. Instead they make 3D printers (stepper motors, motor drivers, microcontrollers, wires and connectors, etc) and sell them to us.

What's next for fiber? (1)

evilviper (135110) | about 5 months ago | (#45566101)

So now that the latency of light through glass is undeniably a costly limitation, what's next for fiber optics?

You'll still need the total-internal reflection whatever the material, but perhaps something with a refraction index closer to c? Water-filled tubes? Hollow tubes filled with a gas?

NY to Chicago is a pretty short run. While everyone is ranting about the economic/political aspects of this move, we'd all benefit if intercontinental telecommunications links had 50% lower latency.

Re:What's next for fiber? (1)

femtobyte (710429) | about 5 months ago | (#45566299)

we'd all benefit if intercontinental telecommunications links had 50% lower latency.

How so? I can't recall any personal harm from overseas communications latency taking a few extra milliseconds; I still seem to be able to get all the data I need from over yonder. Besides oligarchical leeches manipulating markets abstracted from any practical or beneficial use, how do the rest of "we all" benefit from latency reductions beyond reasonable-for-human-time-scale-interaction latencies?

Re:What's next for fiber? (2)

putaro (235078) | about 5 months ago | (#45566383)

Line of sight communications means you need relays somewhere to go around the curve of the earth. We already cut huge latencies off intercontinental links by going from satellite links to fiber optics.

Google Jobs (-1, Offtopic)

Rosie Amber (3449935) | about 5 months ago | (#45566169)

just before I looked at the paycheck 4 $6482, I didnt believe that my neighbour woz like they say realie earning money parttime online.. there best friend has been doing this 4 only about eight months and recently took care of the dept on their home and bourt themselves a Lotus Elan. navigate to this site============> www.blue48.com =============

Re:Google Jobs (1)

pepty (1976012) | about 5 months ago | (#45566539)

Your neighbor must have a speed of light (in air) connection to the stock marketz! Please send me your brochure.

Oh the possibilities (1)

putaro (235078) | about 5 months ago | (#45566375)

Hmmm...Time to take a weather balloon and a big sheet of aluminized mylar on a frame and let them out right in the line of sight and do something that makes money when their communications slow down.

Re:Oh the possibilities (1)

pepty (1976012) | about 5 months ago | (#45566547)

Hmmm...Time to take a weather balloon and a big sheet of aluminized mylar on a frame and let them out right in the line of sight and do something that makes money when their communications slow down.

Like charging $10k per minute to not drop microwave chaff in their line of sight? I like it.

Re:Oh the possibilities (1)

putaro (235078) | about 5 months ago | (#45566581)

I was originally thinking something complicated with the stock market but straight extortion is just so much simpler!

Clueless article (1)

Bazman (4849) | about 5 months ago | (#45566555)

Ever see two ships using those flashing lamp things to talk in morse code? They are communicating at the speed of light.

Data transfer speed is in baud, or bps, or Gb/s, or Encyclopedia Britannicas/s - never metres per second.

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