Wednesday, September 14, 2011

Just in case you thought you and your etrade account could compete in this market

Take note of this story from the Telegraph about a new $300 million fiber optic cable being laid across the Atlantic that hopes to shave 6 MILLISECONDS off the transmission time vs the current standard.  You might be asking yourself  "Who would pay to save 6 millisecond?".  Well,

"It is claimed that a one millisecond advantage could be worth up to $100m (£63m) a year to the bottom line of a large hedge fund."

"The laying of the new transatlantic communications cable is a viable proposition because Hibernia Atlantic, the company behind it, is planning to sell a special superfast bandwidth that will have hyper-competitive trading firms and banks in the City of London and New York queuing to use it. In fact it is predicted they will pay about 50 times as much to link up via the Hibernian Express than they do via existing transatlantic cables."

There is too much money involved here for anyone to do the right thing but at some point this arms race to trade first is going to end poorly for us all (see the flash crash of 2010).

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