EVERY microsecond counts in stock trading. The New York Stock Exchange handles a third of the world鈥檚 stock trading 鈥� around 22 billion messages a day. But , which operates the exchange, wants it to get even faster.
Now cable company is spending $300 million to build a new transatlantic cable to shave 6 milliseconds from the present 65-millisecond transit time between London and New York. It will be the first new cable to cross the Atlantic in a decade and trading firms are likely to pay premium rates to use it.
聯The new cable will shave 6 milliseconds off the time it takes to send data from New York to London聰
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This is because even though a computer can execute millions of instructions in a microsecond, the furthest light can travel in that time 鈥� even in a vacuum 鈥� is just 300 metres. That is an age if algorithms are competing to execute the best trades.
鈥�The speed-of-light limitation is getting annoying,鈥� Andrew Bach, head of network services at NYSE Euronext, told the European Conference on Optical Communications in Geneva, Switzerland, last week.
With global markets currently , it might seem a strange time to worry about the speed of trades, particularly when automated trading was . But traders still want their computers to receive trading data and place orders instantaneously. And customers will go elsewhere if a rival is faster.
Bach proposes speeding up signals by shifting from the solid-core optical fibres used at present to hollow-core fibres. Glass slows light down by about a third, says Philip Russell, who studies hollow-core fibres at the Max Planck Institute for the Science of Light in Erlangen, Germany.
Bach also suggests a few changes to the way in which signals are sent. One is to stop data compression, normally done to save bandwidth. 鈥淲e can鈥檛 afford 2 to 3 microseconds to compress data,鈥� he says. This would mean less information could be sent at once, but it would be quicker.
A second is to abandon error-correction codes, which improve signal quality but take time to process, by designing a system that is more error-resistant. Ending the practice of retransmitting lost data packets could also help, says Bach. This can confuse computer-trading software by scrambling the sequence of trades. Even random fluctuations of 1 to 2 microseconds in the arrival of data packets, an effect called jitter, can confuse computer algorithms.
Some observers worry that further stepping up the pace may be a bad idea. In July, Andrew Haldane of the Bank of England warned that 鈥渇lash crashes, like car crashes, may be more severe the greater the velocity鈥�.
In contrast, Terrence Henderschott of the University of California, Berkeley, finds 鈥渘o compelling evidence鈥� for automated trading causing problems.
