Thursday, 6 March 2014

High-Speed Traders Set to Embrace Laser Technology

In the never-ending race to see who can pull off the fastest trades on the world’s busiest stock exchanges, a Chicago-based communications company has been commissioned to link the New Jersey offices of the New York Stock Exchange (NYSE) and NASDAQ via roof mounted lasers.  The network of lasers will be perched on the tops of office buildings and apartments along a 35-mile stretch between Carteret and Mahwah, New Jersey.

The new system is just the latest in the race between exchanges to offer the fastest trading possible.  In an industry where nanoseconds can mean the difference between profit and loss, trades cannot be performed fast enough.  According to the Wall Street Journal, this latest project takes the financial services sector one step closer to its dream of finally winning the 'race to zero'.

The Journal explains that the 'race to zero' is the idea of getting to the point where data communications - at least for the purposes of executing trades - occur faster than the speed of light.  To date, technology companies working with the financial sector have relied on fibre optics and microwave transmissions to achieve the highest speeds possible.  The successful implementation of laser transmissions would put those other technologies at a decided disadvantage.

As for the traders themselves, they will enjoy the added benefit of being able to place their own servers at the exchange data centre of their own choosing.  If they want servers at multiple data centres, they will be able to do that as well.  This only increases the speed at which exchanges will be able to execute orders and update market data.

Moving beyond Financial Services


It will be interesting to see what kind of success Anova – the company contracted to set up the laser system – experiences with their new laser network.  If it works as promised, it could have a definite impact on the way data communications are developed for the future.  We can easily see particular laser applications being developed for specific industries in a way that best takes advantage of what each one has to offer.

Will laser data transmission ever reach the point of international applications? P erhaps, but that will require overcoming some very formidable barriers, not least of which is distance.  For example, the New York Stock Exchange is linked to the London Stock Exchange via fibre-optic cables running across the ocean floor.  The distance between the two is too great for laser technology to be effective right now.  There would need to be some sort of progressive linking system to make it work.

In all likelihood, we are not even close to the day when laser-based data communications would be commercially viable for IT services and overseas communications.  Nevertheless, that is not what's important in this case.  The importance of the Anova project is one of confirming that directed and concentrated laser light is an effective and reliable medium for high-speed data communications.   We will know for sure in due course…

Sources:

WSJ – http://online.wsj.com/news/articles/SB10001424052702303947904579340711424615716

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