Poor Investor Nemo. He swam away from our shark-infested capital markets a few years ago, as all the HFT made him dizzy and messed with his sonar. Not to mention his having to deal with that forgetful and gullible blue fish, Regulator Dory. Nemo thought he finally would have a little peace, but it was not to be. You see, the Summit NJ firm, Hibernia Atlantic, has just hired a Canadian research ship, Coriolis II to survey sections of the north Atlantic continental shelf, where Nemo is currently residing (these colder waters have in fact become warm due to global warming from all the strip mall stock exchange server farms).
Why exactly is this Canadian vessel surveying Nemo’s new home? Well, Coriolis II will survey the under-sea northern continental shelf because Hibernia Atlantic is going to put in a $300 million transatlantic fiber optic line, called Project Express, and the line will provide a more direct route between financial markets in New York and London. Read about Project Express in this Bloomberg article, Trading at the Speed of Light.
Only a small group of high speed trading firms will pay the steep fees to travel on this HFT superhighway. The fees to travel through this undersea cable will allow HFT firms to cut the speed of trading between New York and London from 64.8 milliseconds to 59.6 milliseconds! That may not seem like a lot of latency savings, but rest assured it is, according to Joseph Hilt, senior VP at Hibernia:
“Those 5 milliseconds could be worth millions every time they hit the button.”
This cable will stretch across the shallow waters of the continental shelf, and while other large cables are the size of a double barrel beer keg, this cable is just the size of two beer cans. As only parts of it will be buried in some shallow sand, it may even be vulnerable to damage from trawling fishing vessels, as well as sharks, which might be drawn to the electrical current.
Not all HFT firms are excited about this cable, however. While the largest HFT firms (you know who they are) can and will pay the lofty toll, many smaller firms cannot. Manoj Narang, CEO of Tradeworx, complains that “all they’ve done is impose a gigantic tax on the industry and catalyze a new arms race.” But Manoj has something up his sleeve: microwaves. Tradeworx intends to start a wireless trading network based on microwave technology that can reduce speeds from fiber optic lines by 30%. AND he plans to offer his network to other HFT firms. This will be great for Manoj and Tradeworx. He has learned from the stock exchanges that the real money is made by convincing everyone in the industry that they need more speed, and then selling them that speed. Manoj is smart; he will survive.
Nemo is a different story. Nemo will be dredged up out of his new home, due to this new Project Express cable, and ultimately cooked in Manoj’s microwave. Sigh.