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Transatlantic Low Latency Connections High speed trading in the global financial markets is the impetus to improve line service latency.
Nothing says that we are part of a global marketplace like the terabytes of data that zip back and forth constantly through the world’s fiber optic trunk lines. Intercontinental cables have been in place for decades. But now there’s a new service gaining importance. It’s low latency networks.
High Speed Financial Trading Is The Driver
What’s driving the demand for low latency right now is high speed financial trading. Increased use of automated trading programs has created a competition for getting trades placed first. First may mean milliseconds or even microseconds ahead of other traders. Certainly this is beyond the capability of the fastest human traders manually entering data. But it’s also so fast that path between traders and exchanges influences performance. The time delay in that path is called latency.
Limited By The Speed of Light
What’s needed for low latency connections is minimizing the distance between source and destination and minimizing the processing time of the electronics in the network. When microseconds make a difference, the speed of light comes into play. The fastest a signal can go is about 186 miles per millisecond. That’s the speed of light in a vacuum. In a physical wire or fiber optic strand, that speed is even less.
Straight Line Paths Are Best
In the United States, low latency network services have taken two forms. One is a fiber optic cable running in as straight a line as possible between trading centers, say Chicago and New York. The amount of equipment on that line is minimized and engineered to pass signals as fast as possible.
Colocation May Help
Another approach is colocation. Companies move into a colocation facility, such as the ones offered by Telx, to be as close to the electronic trading floors as possible. It’s possible to save tens of milliseconds by just being physically next door.
Spanning The Atlantic With Low Latency
Level 3 Communications has now established low latency connections that span the Atlantic from Europe to North America. They’ve also established direct connectivity with BATS Europe, a European Multilateral Trading Facility.
Other Latency Sensisitve Applications
Financial services are a leading application driving the construction of low latency networks worldwide. There are other applications that are latency sensitive as well. It’s well known that VoIP telephony works best if latency is minimized. Long delays in voice packets cause “clipping” of conversations and may even result in dropped calls. Two-way video conferencing is also affected by high latencies. In fact, any interactive application requires some limitations on latency to function properly. As companies commit more of their business processes to cloud computing, latency issues that were once non-existant will become painfully apparent.
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