Turning milliseconds into millions

  • The survey ship currently scouting every centimetre of the planned route by pulling along a sonar scanner 9 m above the ocean floor.
Date:27 February 2012 Tags:, ,

High-speed financial trading gets even faster with a new Transatlantic cable. By Joe Pappalardo

The newest fibre-optic cable crossing the Atlantic won’t carry voice or Internet data. Instead, the line from New York to London will beam financial information to money marketers and hedge-fund traders – 5 milliseconds faster than rival lines.

“If you are trading in one market, you want to be monitoring what’s happening in the other markets,” says Bjarni Thorvardarson, CEO of Hibernia Atlantic, the firm installing the cable. “And if you know that 5 milliseconds faster or sooner than somebody else, you have a big leg up.”

In this day of automated, high-frequency trading, algorithms automatically execute sales and purchases based on triggers in financial data. Regardless of a trader’s investment strategy, his or her software often reacts to the same economic data. And as always in the world of trading, the first orders on the books are the first ones executed. With a split-second advantage, a trader’s order can jump to the head of the line, before prices change as more algorithms place similar orders.

Congress and market regulators are becoming leery of automated trading. “The SEC doesn’t have the technology to understand if high-frequency trading is legitimate or if it’s manipulative,” says Larry Tabb, CEO of the TABB Group capital market research firm.

Thorvardarson says his customers aren’t worried. “To be better than the competition – that’s what competition is about,” he says. The route survey should be finished early in 2012; the R2,4 billion cable will be ready for service in 2013.

The survey ship (see images) is currently scouting every centimetre of the planned route by pulling along a sonar scanner 9 m above the ocean floor. The instrument details the make-up of the bottom, which ranges from sharp rocks to soft clay; this determines the toughness of cable to be laid in a given stretch. In shallow water – anything less than 1 000 m deep – the cable must lie at a depth of at least 3 m to protect it from commercial fishing trawls.

100 km  Distance that light in a submarine fibre-optic line travels in about 1 millisecond.

499 km  The planned Transatlantic cable will be this much shorter than existing lines, making its transmission rate 5 milliseconds faster.

6 021 km  Total length of the new Hibernian Express cable.

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