Fiber and Wireless Trends Parsed
Capacity and availability considerations are driving the development of microwave and dark-fiber technology, according to some trading firms, exchanges and technology providers.
Wireless will be overlaid on fiber rather than replace it, to squeeze out more costs and gain scalability. A ‘democratization’ of some technologies is another trend that will continue to ease capacity constraints.
“The paradox of the day is more focus on cost than ever, yet firms are looking at parallel technologies,” said Ian Jack, head of U.S. infrastructure business at NYSE Technologies. “ Expenditures are being justified in terms of uptime and availability.”
Delivering multi-class market data to multiple locations can test capacity boundaries, and providers and users alike are looking at extensions for redistributing and ‘commoditizing’ data subsets. Firms that have built their networks could monetize the assets, “but if it is the fastest route available, they’re not selling it,” Jack said.
“None of our wireless links are a replacement for fiber bandwidth management,” said Matthew Haraburda, president of XR Trading, which owns and operates a network primarily used by market makers deploying high-frequency trading strategies. The ability to buy bandwidth and ultra-low latency is an important evolution in the technology of market-data transmission, he noted.
According to Mike Persico, chief executive of Anova Technologies, more radio-frequency network is coming online, and with multiple players providing the same speed of transmission, capacity is a differentiator.
Since latency has coalesced to a certain degree, ‘stack ranking’ has become the most important feature for some customers. When clients can subscribe to what they need the most, “it will be a better system, at a better price point, opening access to as many people as possible,” Perisco added.
“For the long haul, given the bandwidth available, you compromise on how you cut down on data,” said Jack. “In metro areas, you make some short-term concessions, but it is less of an issue. To optimize the end-to-end stack, look at what sits behind it.”
Given NYSE Technologies’ diverse client base, “it does not make sense for us to build,” Jack said. “There is a cost reality.”
Though wireless is faster, adverse weather such as fog and snow can disrupt signals, so where availability is most crucial, it will not entirely replace fiber optics. Capacity constraints and costs are other reasons many continue to rely on fiber for data transmissions. Premiums will be a deciding calculation in the value proposition, whether end users are evaluating fiber, microwave, or millimeter wave channels.
“For the buy side it is a function of bandwidth and whether there is a market data feed available,” Persico said. “You can get in for a couple thousand (dollars) a month. To build is a very expensive proposition. If what you need is a very small slice of naked bandwidth to do your own data feed, you can get that fairly cheaply.”
“In the past three years, fiber has given way to wireless. We’ve overlaid all of our sites,” he said, adding that laser technology could be the next game-changer.
Anova last month announced a joint venture with AOptix, founded by two scientists who developed laser technology for the U.S. military. The system combining lasers and wireless dishes will be rolled out on short-range U.S. and U.K. networks, then a longer-haul European path between market centers.
Stephane Tyc, co-founder of low-latency microwave provider McKay Brothers, discussed the Chicago-to-New Jersey microwave path. He said there is limited bandwidth on the fastest circuit, but overall transparency regarding how providers have built out their patterns.
Rather than the number of providers, “what matters is who has the fastest network and who has access to it,” Tyc said. Having the fastest circuit and providing equal access to clients is what levels the playing field for transmission of market data, he noted.
Jack, Haraburda, Persico and Tyc spoke at The Trading Show in Chicago earlier this week.
“Things will change in radio frequency world for cost containment,” Jack concluded. “There will be an emergence of a few top firms, mirroring what occurred with fiber.”