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Comment by michael_miller | Hacker News Reader

My guess is that the first customers for this cable will be in the finance industry. A 30% improvement in latency doesn't matter much for the layman, but in finance, it can mean significant amounts of money. Already, an enterprising trader constructed a more direct line from Chicago -> NYC [1]. Going from 16ms -> 13ms was apparently worth $300 million. This fiber could bring a very large profit if you had exclusive rights to it via a patent. You could execute guaranteed-to-profit arbitrage strategies between any two markets if you were willing to build out the network. And no one could compete with you for a whole 15 years!

[1] http://www.forbes.com/forbes/2010/0927/outfront-netscape-jim...

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And in another case - $1.5 billion to move London 60ms closer to Japan:

http://www.extremetech.com/extreme/122989-1-5-billion-the-co...

Wasn't this mostly stopped in NY when the Exchange set up a server building and allowed firms equal access? They had been buying up the real estate around the exchange for amounts much high than the property's value and it was becoming a bit of a problem. Now they are all in the same building and everyone has the exact same amount of cable running from their server to the exchange.

This move halted the land rush around the fiber access points in New York. But suppose a firm trades both on the NYSE and CHX in Chicago. If there's a price difference on the same stock in the two exchanges, you can buy low and sell high for a brief period (a few ms): if your machines in the NYSE building and CHX building can communicate that price difference faster than anybody else, nobody knows there's a discrepancy to be taken advantage of.

Changes in commodities prices in Chicago will have "known" affects on stock prices in NYC. If you can get the information between the two cities faster, then despite this equal access in the last leg you can still take advantage of knowing before the others.

(for the moment). HFT will eventually fall off a cliff or be regulated out of existence. I think the FSA in the UK are on this already.

Why would it be regulated out of existence? Does it not provide large amounts of liquidity?

It does but there are some real downsides:

Failures can cause exchange crashes big time. This has nearly happened a few times before.

Risk is centralised and multiplied.

HFT contributes to volatility.

Hurts long term investment by human brokers.

To play devil's advocate:

- Can't failures be counteracted by having failsafe measures? For example, if the market goes down more than 5% in a few-minute period, the market temporarily shuts down for a cooloff period of several hours to diagnose what's happening.

- Isn't HFT irrelevant to long term investment, given that it erodes away short-term profit, leading to accurate pricing of the stock?

Good questions.

A failsafe/circuit breaker is a possibility but shutting down the market will affect confidence. I'd prefer to see a market operate on a tick basis I.e all trades for a tick are transacted in one go with a window between each tick and assertions before and after the tick processing.

Fair point with your second comment.

nanoseconds it's where it's at on wallstreet

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