Laser Beams Help Stock Traders Do Rapid-Fire Business
Light beams mounted on the tops of buildings could soon carry messages about rising and falling prices.
A form of rapid-fire communication previously only available to the military is now coming to the financial world. Lasers perched atop high-rise buildings will next month allow the New York Stock Exchange’s data center in Mahwah, NJ to communicate with NASDAQ‘s data center in Carteret, NJ. Though these two data centers are only 35 miles apart, the light will allow them to communicate with unprecedented speed. It is the culmination of a quest for instantaneous trading that first utilized custom-built fiber-optic cables, then microwave and later millimeter-wave transmissions, and the speed at which traders’ orders are transmitted is rapidly approaching the speed of light. The technology is expected to spread to the Stock Exchange’s trading clients as well, which are currently offered a system that uses microwaves.
The two laser engineer companies responsible for the advance in technology, AOptix Technologies – a Silicon Valley-based company whose previous laser tech clients were mainly the military, and Chicago-based Anova – find the origins of the technology in the 1990’s, when scientists trying to correct distortions on space imagery developed telescopes with flexible mirrors that could adjust thousands of times a second. These tiny movements have allowed for lasers that use their light to communicate.
Previously, the controversial practice of micro-skimming stock prices – which represent a company’s predictions of its future performance – has led to some surprisingly low-tech solutions in order to get predictions as quickly as possible. For example, Anova and other communications companies have placed networking equipment close to the very source of predictions, at 1275 K Street in Washington DC, to avoid the lag involved in sending information long distances. Other traders have sidestepped news media entirely, obtaining news releases directly from distributors.
This trafficking in tiny market fluctuations have caused several events of surprising magnitude, such as a ‘flash crash’ on May 6, 2010, and tracks movements that are far faster than any actual market behavior. Thus, regulators like the Securities and Exchange Commission have viewed this advance in technology warily. However, there’s no doubt that such an incredible technology could in the near future be benefiting us all, making communication even more blindingly fast than it has become.