$1.5 Billion: the Cost of Cutting London-Tokyo Latency By 60ms

MrSeb writes "Starting this summer, and thanks to the continuing withdrawal of Arctic sea ice, a convoy of ice breakers and specially-adapted polar ice-rated cable laying ships will begin to lay the first ever trans-Arctic Ocean submarine fiber optic cables. Two of these cables, called Artic Fibre and Arctic Link, will cross the Northwest Passage, which runs through the Canadian Arctic Archipelago. A third cable, the Russian Optical Trans-Arctic Submarine Cable System (ROTACS), will skirt the north coast of Scandinavia and Russia. All three cables will connect the United Kingdom to Japan, with a smattering of branches that will provide high-speed internet access to a handful of Arctic Circle communities. The completed cables are estimated to cost between $600 million and $1.5 billion each. As it stands, it takes roughly 230 milliseconds for a packet to go from London to Tokyo; the new cables will reduce this by 30% to 170ms. The latency drop will mainly benefit algorithmic stock market traders, but other areas like education, telemedicine, and POTS will also enjoy the speed-up. Perhaps more importantly, almost every cable that lands in Asia goes through a choke point in the Middle East or the Luzon Strait between the Philippine and South China seas. If a ship were to drag an anchor across the wrong patch of seabed, billions of people could wake up to find themselves either completely disconnected from the internet or surfing with dial-up-like speeds. The three new cables will all come down from the north of Japan, through the relatively-empty Bering Sea. In addition, the Arctic Ocean, where each of the cables will run for more than 5,000 miles, is one of the least-trafficked parts of the world. That said, the cables will still have to be laid hundreds of meters below the surface to avoid the tails of roving icebergs."

Comments

Bering Sea?

[wolrahnaes]

Next, on Discovery's Deadliest Cabling Job...

Quake Servers

[Anonymous Coward]

Oh awesome, now I can play on japanese quake servers!

Also good for gamers

[idontusenumbers]

Quake 3 on a 230ms connection would be awful. 170 might at least be playable.

Re:Also good for gamers

[mercnet]

I played on a 56k modem that averaged to about 500ms. You quickly learn how to lead railgun shots.

Re:Also good for gamers

[SuricouRaven]

I think chess games via postal service may win the latency contest.

Re:Also good for gamers

[MiniMike]

Oh you kids and your new-fangled postal service! When I was a kid we would carve our next game move onto a rock and wait for the glacier to deliver it. And we liked it that way.

Now where did my fiber go....

Re:Also good for gamers

[Lumpy]

FPS via postal mail is possible.

Get a copy of Steve Jacksons "FRAG" and Play by mail. in fact I bet you can find someone that does.

Re:Also good for gamers

[readin]

You were lucky to have a glacier.

We had to wait for continental drift.

Re:Also good for gamers

[RockDoctor]

I'm playing Go with someone who has been dead for a couple of millennia. Does that count?

Millisecond trading

[Michael Woodhams]

Investing in shares for time spans of months is of general benefit to the economy, directing investment dollars to those best able to use them. Millisecond trading is of no benefit to anyone except millisecond traders, and any money they make is at the expense of people trying to do something productive. I propose that stock markets shift to a 'clock pulse' trading model: Trade bids for (e.g.) Apple are accumulated for (e.g.) 5 seconds and then all sales are resolved without regard for the order in which the bids arrived. This will cause no problems to real investors, but will rid us of the millisecond leaches.

However, I am not experienced with the share market, so constructive criticism is welcome.

Re:Millisecond trading

[0olong]

What you propose is irrelevant. The stock markets are operated by the same people that benefit from HFT. They have no incentive to change. If you don't like that, make your own market place. Of course, to do so requires a lot of money and power, which you probably don't have unless you're one of said people to begin with.

Re:Millisecond trading

[Anonymous Coward]

Cross-exchange arbitrage strategies are typically performed by servers located as close the the midpoint of the cabling between them as possible. Perhaps it's time to speculate on Alaskan rack space.

Re:Millisecond trading

[Michael Woodhams]

IPOs and share issues help the economy, but nobody would buy these shares if there wasn't a way to recover the investment (hopefully with a profit) later. The only shares I own were purchased directly from the issuing company. (Which reminds me - it is over a year since I looked at their value. Crud - they're both doing horribly.)

The share market also provides a mechanism for takeovers and mergers.

Re:Millisecond trading

[0123456]

When you buy a share the only person who benefits is the person who sold it to you. It helps the company not at all.

While I generally agree that the stock market is mostly legalised gambling with trillions of dollars, the last company I worked for was only able to buy up a couple of its ailing competitors by a mix of cash and share swaps; had the price been significantly lower that would not have been possible because it would have required far too much cash.

Re:Millisecond trading

[umghhh]

I think GP's post was aimed at the leaches i.e. automatic trade machines and other such things used in so called High Frequency Trading which is a legalized fraud (as they can look in the future of other traders). There was interesting debate recently so you can have a look and see for yourself.

Re:Millisecond trading

[DarkOx]

Outside of the occasional "flash crash", which by the way have been mostly handled by the SEC reversing sales and pushing the reset button pretty effectively, I see HFT as mostly harmless. It might not add any value to the enterprises being traded but it makes the market better for investors not worse over all. The more orders out there at any time means the better shot an actual investor has at having their order filled when the want it.

Liquidity in the market is a good thing. I don't have to wonder if my shares will sell, I know I can push the button if selling and KNOW there will be buyers, or I can push buy and KNOW there will be sellers for the other side of the transaction.

Less transactions would mean potentially having to wait for a buyer or seller (okay not really pre-HFT electronic trading was already pretty quick) or worse having my order actually move the market by driving up or down the bid, in order to find buyers or sellers strike prices. By having tons of HFT machines out there ready to pounce on any movement of a few hundredths of cent off the current ask, actual investors get a solid price book.

Re:Millisecond trading

[necro81]

When you buy a share the only person who benefits is the person who sold it to you. It helps the company not at all

Is it not also possible that the person buying the share benefits as well? If a trade wasn't mutually beneficial (at least from the respective points of view of the people involved) then it wouldn't happen.

Think of the alternative: a person invests in a company, but can't ever get their capital back unless the company buys them out. So either capital investment becomes slower and riskier than it was in medieval times, or else companies have to keep huge capital in reserve for whenever someone wants to get out (i.e., the company becomes a bank that just so happens to be engaged in some other business). It may seem obvious in retrospect, but corporations and stock markets were major innovations that have contributed to centuries of economic growth.

Re:Millisecond trading

[dean.collins]

actually high frequency trading IS good for the economy it provides liquidity, eg you know you can pretty much always sell your shares as these HF traders have the orders ready for purchase etc.

Re:Millisecond trading

[AlecC]

I agree with you in principle, though I accept faster rates than you seem to for underlying "value adding" transfers. I think corporate treasurers need to be able to do currency exchanges on a timescale of minutes in order to balance debits and credits across multinational groups. Providing liquidity behind such reasonable transactions is a good thing, so an automated system that takes a large lump of money from one corporate action and lays it off in ten different ways, evening out risk and spreading the price signal, is good, But such a system needs to run only perhaps ten or twenty times as fast as the underlying transactions. If real traders have a timescale of minutes, then a timescale of a few seconds, as you suggest, is adequate to provide all the added value that the markets can generate.

What worries me about HFT is not the number of microtrades, but the fact that they are actively used to trade for profit. As long as it is pure risk sharing, the system is self damping. But when systems start actively trying to spot and anticipate trends, you put a positive feedback term into the system. And with HFT, such a positive feedback can spiral out of control before it can be stopped. Other posters have said that this doesn't matter: when it has started to happen on previous occasions, and automated stop and roll back has fixed the problem. I worry that thing that because it never has gone wrong, it never will go wrong has been the prelude to significant disasters in the past.

Re:Millisecond trading

[DerekLyons]

Investing in shares for time spans of months is of general benefit to the economy, directing investment dollars to those best able to use them. Millisecond trading is of no benefit to anyone except millisecond traders, and any money they make is at the expense of people trying to do something productive.

With the sole exception of IPO's the only difference between holding a stock for a millisecond or for months is how long you hold the stock. In both cases you pay the guy you bought the stock from, and get paid by the guy you sell the stock to. In neither case does the company in question see even a thin dime of your money.
 

However, I am not experienced with the share market, so constructive criticism is welcome.

The problem isn't that you're inexperienced. The problem is that, like so many people, you're ignorant of how the market works and you've totally bought into the propaganda about "investing" in the stock market and the "evils" of millisecond traders. All trading (other than IPO's) is for the benefit of the traders - whether it's Goldman, Sachs or your grandpa selling off that Coke stock he's had in his IRA since the 80's.

Re:Millisecond trading

[readin]

Also, 'holding' a stock for a millisecond, because you gamed the system using servers, locations, and algorithms not available to the market as whole, is done for one reason.
To see the orders the 'real' investors make, buy a millisecond before they can, and then sell it to the original actual investors for a fraction of a cent more than they would have bought it anyway from a true market.
It does not help with pricing, it does not benefit the market itself.
It is no different than theft. If you make a huge mental stretch you could maybe compare it to ticket scalping.... Something also almost universally illegal.

Except that scalpers actually do help set a more correct price based on the market. Seeing a game or concert is worth more to some people than to others. Scalpers make sure they people who are willing to pay the most to see the game or concert are the people who actually get to see it. (The morality of the fact that "willing to pay the most" sometimes means "has the most money" rather than "wants to see it the most" is a separate question.)

I think the scalpers help society far more than the millisecond traders do.

Re:Millisecond trading

[RockDoctor]

Investing in shares for time spans of months is of general benefit to the economy,

Many would argue that investing for periods of less than a [report cycle] is simply going to encourage [Management] to play to the short-term crowd.

My employers have managed about 8% year-on-year growth for the 20 years that I've been an employee. But if we'd been a publicly-traded company, we'd probably have been shut down and lost the personnel asset several times in that period. 1.08^^20 = 4.7 ; good enough?

No, probably not for the sharks. I must remember to use power tools to sodomise the next shark I gain control of. Painfully. Without consent. Using my definition of "shark".

Yay self-destruction

[billcopc]

"The latency drop will mainly benefit algorithmic stock market traders"

In other words, these cables will help machines ruin the global economy.

A part of me is kind-of glad they're speeding this up. We all know the system is destined to break, so the sooner that happens, the sooner people will wake the fuck up and demand change.

Re:Yay self-destruction

[Anonymous Coward]

Stock market doesn't mean shit about the economy. It's not a "good economy" when stocks go up--it's just inflation.

Re:Yay self-destruction

[isorox]

It's funny. But idiot's like the GP don't understand that speculators like me make money up and down in the market. I don't care one way or the other, I can make money in either direction.

For every cent you make, someone else loses it. You're like the sad people in vegas that spend their lives camped on the slots, the only difference is you gamble with other peoples money.

Re:Yay self-destruction

[gl4ss]

using hundreds of millions dollars worth of work time for it means shit for economy though..

and probably the op was referring to stocks getting prices not based on their worth, but by algorithms which trade with other algorithms which trade based on what other people trade and not based on what the actual company worth is or is going to be.

who gives a shit though? also automatic traders will have serves in japan if they're trading in japan so this(new cabling) isn't really going to matter at all to them. this will matter if you want to skype to your friend in japan/china though. skype and chinese players digging for wow gold. that's who it matters to.

Re:Yay self-destruction

[bgarcia]

For every cent you make, someone else loses it.

Yes, because there is a fixed amount of wealth in the world in all of history, and nobody ever increases society's wealth, correct?

Re:Yay self-destruction

[Wildclaw]

Yes, because there is a fixed amount of wealth in the world in all of history, and nobody ever increases society's wealth, correct?

Except that we weren't talking about wealth, we were talking about currency. And excluding stabilizing inflation mechanics, yes the currency is basically fixed.

To actually increase wealth, you need to have people being able and wanting to spend money on actual wealth refinement, and people able and willing to provide said work.

And if you want to know why so much of economic theory is bullshit, you just have to look at how much of it ignores if people actually are able/willing/wanting to spend/work.

Re:Yay self-destruction

[petermgreen]

also automatic traders will have serves in japan if they're trading in japan so this(new cabling) isn't really going to matter at all to them

The traders it matters to are those engaging in arbitrage.

Many things (stocks, commodities, derivitives whatever) are traded on more than one market. Each market develops a price for the thing. Prices in the different markets are held reasonablly close by people engaging in arbitrage (buying in one market and selling in another). The lower you latency you have to BOTH markets the lower the risk that prices will shift to an unfavorable position while you are in the middle of executing your arbitrage.

Re:Yay self-destruction

[Ash Vince]

For every cent you make, someone else loses it.

Yes, because there is a fixed amount of wealth in the world in all of history, and nobody ever increases society's wealth, correct?

Some people increase societies wealth but that does not come from buying and selling shares, it comes from people at the bottom actually making stuff. Of course some types of selling shares (like IPO's) does help the people at the bottom do this by facilitating investment.

The utterly parasitic stuff is crap like futures trading where you are effectively just gambling on whether a share will go up or down over a particular period. You basically agree to purchase or sell a quantity of shares at some specified point in the future at a particular price. This is rally nothing more than glorifies gambling but it is popular as it how you can make the most (or lose the most) money. In a recession short selling (betting a stock will go down) is often pretty easy to get right.

This also allows you to bet the stock will drop over a particular period then spend most of that time trying to spread bad rumours about the companies projected profits or how bad their business model is, if the rumours stick you can make a fortune even if they ultimately turn out to be false as your option date will have passed by the time the company announces its profits or quells the markets fears.

Going long is betting a stock will go up over a particular period and that is far less parasitic in my opinion, but I still see it as less constructive than actually buying the shares in a company outright and waiting for a dividend or just selling them when they have gone up in value.

Re:Yay self-destruction

[sociocapitalist]

Associated but not correlated. Those concerned would lose money anyway it's only a question of who buys the stock (or whatever) at the new price first.

Companies and thus national societies benefit from investment but that being said there should be only real assets at stake not virtual ones resold however many times over.

With regard to the article:
1) Who gets the oil found en route?
2) "...with a smattering of branches that will provide high-speed internet access to a handful of Arctic Circle communities. " - naturally cooled datacenters anyone?
3) "The latency drop will mainly benefit algorithmic stock market traders" - I certainly hope my tax dollars aren't paying for this. Also, fuck the algorithmic stock market traders generally speaking.
4) "If a ship were to drag an anchor across the wrong patch of seabed, billions of people could wake up to find themselves either completely disconnected from the internet or surfing with dial-up-like speeds." - True only if the Internet routed using static routes with no OAM, no BFD, no physical interface down detection. Real world BGP will reroute to the paths in use today.
5) Did I mention fuck the algorithmic traders?
6) Profit! (obligatory)

Hundreds of meters below the surface?

[Compaqt]

Surface of the water or of the seabed?

I'd say you wouldn't need more than a few meters below the seabed.

On the other hand, since the depth of the ocean may vary considerably, what sense does it even make to say they're burying it hundreds of meters below the surface of the water?

That's like specifying underground land line depth in feet below the mesosphere.

Re:Hundreds of meters below the surface?

[currently_awake]

Given that north american cellphone rates are based on the stratosphere that's not a bad idea.

Re:Hundreds of meters below the surface?

[bryan1945]

I was kind of wondering the same thing-
"That said, the cables will still have to be laid hundreds of meters below the surface to avoid the tails of roving icebergs."
I thought all ocean cables were put on the seabed floor, which generally are fairly deep.

Re:Hundreds of meters below the surface?

[SuricouRaven]

Because the surface is where the hazards float: Shipping and iceburgs. The most dangerous thing you'll find on the bottom are sharks, that are rather fond of cables. It's the magnetic field from the repeater power current - screws with the shark's field sense, makes them confused.

Re:Hundreds of meters below the surface?

[BeaverCleaver]

Um, what TV show told you that?

Re:Hundreds of meters below the surface?

[SuricouRaven]

A few seconds of googling confirms that sharks do indeed bite cables. http://findarticles.com/p/articles/mi_m0DUJ/is_9_105/ai_n27568414/

Re:Hundreds of meters below the surface?

[BeaverCleaver]

Ah, thanks. Do undersea fibre-optic cables use repeaters? And is the power for the repeaters run down the same cable?

Re:Hundreds of meters below the surface?

[SuricouRaven]

They do. All-optical repeaters using erbium-doped fiber, or something of that nature. The power is supplied via a single conductor, which doubles as one of the (many) protective layers. One end holds the conductor above earth potential, the other holds it below, and the repeaters run off the resulting current.

Not much ship traffic but if something does happen

[erice]

Making repairs is a going to be major undertaking.

Looking at the map, latency could be reduced further by routing via the North Pole. Of course that makes the troubles with laying and repairing the cables even worse.

Expanding bandwidth, ignoring latencies.

[unixisc]

Why not just leave the latencies alone? It's not like one gets cumulative latencies - the 230ms is constant in time.

I guess the Bering Sea will be the crosspoint b/w the Siberia-Alaska railline that the Russkies want to build, and this cable that runs from the Arctic to the South. Probably run it along the Kamchatka peninsula coastline, then across to Sakhalin, Japan, then on to Taiwan, Philippines and along the S China Sea to Singapore on one end, and on the other, from Philippines, run it along to Papua New Guinea and then Australia and New Zealand. From Singapore, they could run a line to India, and get enhanced bandwith in that country.

Re:Expanding bandwidth, ignoring latencies.

[currently_awake]

You get the added benefit of not routing your economy through the NSA.

Re:Expanding bandwidth, ignoring latencies.

[EdIII]

As if the UK is going to be any better? If it is a race to fascist totalitarianism than the UK is currently leading with the US and Australia trailing behind....

Re:Expanding bandwidth, ignoring latencies.

[Custard Horse]

Maybe, maybe not - but one fewer snooping parties cannot be a bad thing can it?

Re:Expanding bandwidth, ignoring latencies.

[blackicye]

Posting to remove misclicked mod, oops.

Re:Expanding bandwidth, ignoring latencies.

[necro81]

The length of the cable is significantly shorter (by thousands of km), therefore the latency is pretty much guaranteed to be shorter. I don't think latency is as big a motivation as some would believe, but reduced latency is always a plus.

Re:Expanding bandwidth, ignoring latencies.

[Lumpy]

The NSA does not own canada yet.

At least the republicans in Congress have not voted on annexing Canada, I think they are arguing over earmarks right now.

Re:Expanding bandwidth, ignoring latencies.

[Anonymous Coward]

Hiberinia Atlantic is curently Surveying a Cable being between Halifax NS and London. It will Save 7ms over the existing route from New York - the high frequency traders will pay a premium to be 7ms faster.

Saving 60ms - thats Huge.

Re:Expanding bandwidth, ignoring latencies.

[readin]

The last thing the Republican would want to do is bring in a few million more socialist voters who have difficulty with the concept of freedomhttp://en.wikipedia.org/wiki/Censorship_in_Canada#Human_Rights_Commissions.

Re:Expanding bandwidth, ignoring latencies.

[dgatwood]

It's not like one gets cumulative latencies - the 230ms is constant in time.

Actually, you do. Consider HTTP:

• Client requests the page text.
• (latency x)
• Client gets the response and requests the JavaScript code.
• (latency x)
• Client gets the JavaScript code and runs it. The code requests several images.
• (latency x)
• The images are displayed.

Total effective latency for the images is 3x. Latency is very much cumulative when one request depends on another. It is only non-cumulative when you are solely using the link for batched downloads. This is why satellite and cellular Internet service can border on unusable for some tasks.

Re:Expanding bandwidth, ignoring latencies.

[RockDoctor]

And can one route through Norway? Or Russia?

Re:Expanding bandwidth, ignoring latencies.

[JBaustian]

Perhaps if the fascist totalitarian party in control of the regime in the US, is defeated in the November election, things might change?

Neutrinos

[mbone]

If you want to cut latency, communicate through the Earth with neutrinos. If we could just get the bit rate up some (from the current 0.1 bps), you could communicate to anywhere on Earth with a one way time of 40 milliseconds.

Re:Neutrinos

[bryan1945]

If the 0.1bps is faster than light, what is the practical real-time bandwidth?

Re:Neutrinos

[Michael Woodhams]

That would be from anywhere on Earth with a high intensity particle accelerator to anywhere on Earth with a huge particle detector buried hundreds of metres underground.

Re:Neutrinos

[erice]

That's true as long as it doesn't take any time to detect and decode a signal sent with neutrinos. Neutrinos are not electrons and trying to extract a signal from them is challenging enough that, in the near term, the computational latency would likely dwarf the transit time.

Re:Neutrinos

[Anonymous Coward]

Slashdot definitely needs new moderation options. I suggest these from Mythbusters: Confirmed, Plausible and Busted. Your post is +5 Busted! ;-)

Re:Neutrinos

[InterGuru]

It's already been done.

The first ever transmission of information using a beam of neutrinos has be achieved by physicists in the US. The demonstration is highly preliminary – it operates at less than 1 bit/s – and will require a lot of development before it can have any useful application. Nevertheless, the work proves a concept that physicists have been contemplating for years and that could ultimately be used in situations where other means of communications are not feasible.

.

Re:Neutrinos

[timeOday]

Wow, I wonder if anybody is exploring this for communicating with or detecting submarines.

$600 million or $1.5 billion? Depends

[hoggoth]

The higher estimate of $1.5 billion is contingent on using Monster Cables.

Re:$600 million or $1.5 billion? Depends

[0123456]

The higher estimate of $1.5 billion is contingent on using Monster Cables.

Wall Street can afford to buy the best.

Re:$600 million or $1.5 billion? Depends

[alienzed]

Purchased at Best Buy no doubt.

Re:$600 million or $1.5 billion? Depends

[sociocapitalist]

Actually I had assumed Denon...

Posting doesn't match up with the speed of light

[NumberField]

The entire circumference of the globe is about 24000 miles, which takes light 128ms (in a vacuum). The article's claim that the current time to send a packet from London to Tokyo is 230ms therefore seems doubtful. In this time, light can go 42840 miles in a vacuum -- or nearly twice around the the entire distance around the world (24091 miles). Light in a fiber is about 35% slower, but this still leaves time for 37177 miles.

Re:Posting doesn't match up with the speed of ligh

[Anonymous Coward]

Because internet traffic isn't converted or delayed while it goes around the world.

Re:Posting doesn't match up with the speed of ligh

[ModernGeek]

Yeah, but the packets have to be routed, and that takes time, too.

Parasitic trading

[Anonymous Coward]

Parasitic trading is tolerated not desired. It diverts profit from investors into traders, reducing the number of investors in a market by reducing the profits they can make and thus reducing the capital available to companies. Fewer companies go to the stock market to obtain capital as a result.

So yeh, you basically understood it correctly, however it has little to do with 'share' trading, rather derivatives.

The derivatives market far outweighs the shares market these days. These are pure bets stuff like: "derivative X pays out k(Z-W) for each cent asset Z rises above (K+U+Y)/3.... ladies and gentlemen place your bets I will spin the wheel". It's a bookies pure bet.

Unlike a proper bookies, Wallstreet pays out more money that it receives, so banks around the world place bets on these derivatives in order to make money. The banks and Wallstreet can afford to buy cables, it's pocket change since the underlying asset may only be a shopping mall worth $50 million, but the derivatives derived from that can be worth billions since it's a virtual asset with no real value beyond the fact it pays out a profit.

In a good year (when they take more money than they pay out) Wallstreet awards themselves big fat bonus's, in a bad year, the Fed extends them more credit against smaller assets. So overall, because they pay out more than they take in, their borrowing leverage increases. Today it's something like 30:1 or more.

The Fed says 'the loans were good we got all the money back', but that's a lie. They print money against 'Linden dollars', Wallstreet buys assets that pay out enough to cover the interest with that cash, Wallstreet borrows against those new assets, and pays back the money borrowed against the 'Linden dollars'. The Fed says 'hey look we got all our 'Linden loans' back', Wallstreet gets to own a real asset, everyone holding dollars has been silently robbed by inflation.

But hey - faster internet! /rant

Re:Parasitic trading

[tlhIngan]

Parasitic trading is tolerated not desired. It diverts profit from investors into traders, reducing the number of investors in a market by reducing the profits they can make and thus reducing the capital available to companies. Fewer companies go to the stock market to obtain capital as a result.

Once a company IPOs, that's pretty much all the capital they get. And the bank handling the IPO pays the company to do so at a fixed price. Now, a company may choose to only sell say, 10% of itself, holding onto 90% of itself for times it may need extra money.

At which point, it becomes tricky because to sell a share, you need a buyer - if the bid-ask spread is too high, the shares are thinly traded and being able to sell a share for what you want gets a LOT harder.

E.g., XYZ company owns 1,000 shares in itself. Its last trade price was $5. But the bid-ask is huge, say, bid $4, ask $6. If XYX needed $1000 now, it would have to sell 250 shares at $4 and lose a quarter of its holdings in itself. They could offer 200 shares at $5/share (lowering bid-ask since it's bid $4, ask $5), but there's no guarantees they would sell (i.e., low liquidity - it's hard to convert shares into cash and vice-versa). Heck, the person bidding $4/share may not even want 250 shares. They may want say, 10. At which point 10 shares are sold, and XYX still needs to raise $960 and hope the next guy in line is bidding close to $4.

HFT does lower the margin - purely because they're trying to put in bids higher than the current bid, and asks lower than current ask because they're trying to make money on the fractions. But it also means that the next bidders in line are more likely closer to the last trade price (so XYZ may have to sell shares at say, $4.95, $4.90, $4.85, ... until it reaches $1000).

Sure the person who asks $6/share gets screwed because they're forced to sell at say, $5.05 rather than $6. Except they're also more likely to move stock at $5.05 - they could very well be asking $6 and fail to sell a single share while everyone else is buying and selling XYZ simply because of the lower ask.

Thinly traded stocks are especially annoying to hold because of this - there's not enough liquidity in the market to be able to liquidate those stocks except at substantially discounted rates.

Re:Parasitic trading

[jpmorgan]

Sigh, you have a very incorrect understanding of derivatives. First off,

These are pure bets stuff like: "derivative X pays out k(Z-W) for each cent asset Z rises above (K+U+Y)/3

No derivative works that way. Derivatives are, for the most part, options that allow you to make a trade in the future at a predetermined price today. For example, I can buy a put option which gives me the option of selling some shares 6 months from now at a preset price. Of course, it's not just shares. Futures are most heavily traded on commodities (wheat, oil) and currency (the US dollar, the euro, the yen).

You're right that they can be used for gambling. A speculator can buy and sell options, for example, and take the risk of market movements. But the reason why derivatives are profitable for traders is because they're buying risk for a premium. That means somebody else is selling risk.

Let's say I live in the US, and I want to sell my product in Europe. The revenue I gain in Europe will be in Euros, but it's not fiscally sensible to repatriate those funds constantly: it's cheaper to keep my european revenue in Euros, and repatriate it once a year, or once a quarter. But if the Euro suddenly tanks, I could stand to lose an enormous amount of money. If I'm a small business and my European business is big enough, that could be a big enough disruption to my cashflow to bankrupt my company. So I buy Euro put options... they'll allow me to reconvert my Euros into Dollars at today's exchange rate, regardless of what happens on the currency markets. I'll let a bank, with billions in assets, take the risk. That's a service, no different from insurance.

Hell, even if I'm not a small company, it's still worthwhile. Even if my Euro exposure is small, accounting for the long-term risk is complicated and requires an in-depth understanding of the European and international economy. If I'm just welling widgets, I probably don't have that expertise in house, but large currency speculators do. The currency speculator that I'll buy the options from will certainly be making a decent profit margin on the trade, but they can hedge their cashflow more efficiently than me, since they have a better understanding of the risk.

It's not just currency either. The futures market has long been exploited by agriculture to insulate farmers from price variations. It takes months to grow wheat. If the wheat price collapses between now and harvest time, I could be out a lot of money. The futures market lets me push that risk onto speculators, and let me - the farmer - worry about what I'm good at: farming.

Or let's say I'm interested in Apple's new dividend, but I'm not so confident in their stock price. A stock price captures both current revenues, and expectations of growth... if I think Apple's not likely to continue their revenue growth, I can buy their stock to get the current income stream, and use call and put options to insulate my investment from the fluctuations in the stock price. I won't make any money if Apple's stock continues to go up, but I also wont lose any money if the stock goes down.

Derivatives aren't gambling. They're insurance. Saying we should ban derivatives because they're gambling is as stupid as religious types who say insurance is a sin.

Re:Parasitic trading

[Rich0]

You don't need HFT to have market markers.

If you think a stock is undervalued you buy some of it. If you think it is overvalued you sell some of it.

In your example there are people selling at $6, and buying at $4. If I think the intrinsic value is $5 then I can put out buys at 4.50 and sells at 5.50 and be the first person anybody goes to to make a trade, and make a profit on every one (assuming the real value really is $5).

Re:Parasitic trading

[dj245]

Unlike a proper bookies, Wallstreet pays out more money that it receives, so banks around the world place bets on these derivatives in order to make money.

Maybe I don't follow this completely, but I take issue with this. Wall street is basically revenue neutral. For every winner there is a loser, and for every dollar in, that money has to come from somewhere because no wealth is created.

You can argue that value is created, because you can buy something which you value but which somebody else doesn't value so much. The net result of that is an increase in value. For example, suppose I have a Kitkat bar and you have a Hersey bar. I hate Kitkats (in this example anyway) and you don't like Hersey bars. If we had to assign a value to the bars we had, it might be $0.10 each bar, because that might be the price we would pay for candy bars we don't like. But, I happen to love Hersey bars, and you like Kitkat bars. So we trade and the value is increased. I might happily pay $1.00 for a Hersey bar, and similarly you might value Kitkats at $1.20. However, the assets are the same. If they were worth $0.75 before each before, that is still what they are worth.

I don't agree that all this derivatives shenanigans increases either value or wealth. For anybody betting on a derivative, someone must be betting against it. And it doesn't increase value because often the person betting for something doesn't realize that someone else has silly derivatives and/or is actually influencing the company to make sure their derivative pays out. There is no value-increasing trade. That, I think is why we are in the mess we are in.

Why focus on Trading when we talk about latency?

[grelmar]

There are so many internet applications where low latency is a win. VOIP, remote systems management, two-way graphical applications that for various reasons are location sensitive (there's more of these types of apps then you realize - think proprietary software that would be either illegal or economically dangerous to physically locate outside of NA or the Eurozone, including geophysical analysis software for mining/oil exploration, among other things)...

There are lots of scientific applications where latency is critical.

But oh, that would be difficult to discuss. Much easier to relate everything to a vilify-able application.

Come on, for once, talk about the benefits of a mega infrastructure project.

Oh, right... Slashdot. My bad. That's just not what we do here.

Re:Posting doesn't match up with the speed of ligh

[doshell]

You also have to account for the queueing delay at the routers, which are store-and-forward devices. That said, I really have no clue whether 230ms is a realistic number.

Re:Posting doesn't match up with the speed of ligh

[currently_awake]

You forgot amplifier latency and modem latency. Also packet acknowledgment.

Still can't win call-in shows

[acidradio]

No matter what they do to fix this, no matter what they do to reduce the latency I NEVER win any radio call-in shows. You would think this would help me be caller #25 but it never works. It's always busy or I just don't make that number :(

Re:Still can't win call-in shows

[Sneeka2]

Well, soon you'll be able to try your luck on Arctic call-in shows. I'd say the chances should be pretty decent there.

Re:Still can't win call-in shows

[Muad'Dave]

Yeah, but the prize would be 100 lbs of whale blubber or some such.

Re:Posting doesn't match up with the speed of ligh

[AHuxley]

Uk, many severs (US base), water, loops around natural and unnatural problems, Japan (US base), many severs.
Even if the UK and Japan side offer real dedicated vs best effort, you still have to move around both regions before you hit pure new optical.
Peering, telco deals can all send your packets for small or long loops before they get to fancy new projects.

Re:Posting doesn't match up with the speed of ligh

[Anonymous Coward]

If it travels through USA, it seems reasonable:

$ ping visitfinland.ru
PING visitfinland.ru (109.70.163.2): 56 data bytes
64 bytes from 109.70.163.2: icmp_seq=0 ttl=55 time=199.910 ms
64 bytes from 109.70.163.2: icmp_seq=1 ttl=55 time=198.688 ms
64 bytes from 109.70.163.2: icmp_seq=2 ttl=55 time=203.657 ms
64 bytes from 109.70.163.2: icmp_seq=3 ttl=55 time=202.524 ms
64 bytes from 109.70.163.2: icmp_seq=4 ttl=55 time=202.258 ms
64 bytes from 109.70.163.2: icmp_seq=5 ttl=55 time=201.571 ms
64 bytes from 109.70.163.2: icmp_seq=6 ttl=55 time=200.485 ms
^C
--- visitfinland.ru ping statistics ---
7 packets transmitted, 7 packets received, 0.0% packet loss
round-trip min/avg/max/stddev = 198.688/201.299/203.657/1.579 ms

Those pings were sent from California.

Re:Posting doesn't match up with the speed of ligh

[Sneeka2]

I really have no clue whether 230ms is a realistic number.

I currently get a 431ms Japan <> UK ping on a pretty mediocre Japanese ADSL line in the country side.
So, yes, that's realistic.

Re:Posting doesn't match up with the speed of ligh

[Anonymous Coward]

Light doesn't flow cleanly through fiber, it bounces around *a lot*. There is also the delay of routing, and as you mentioned, the lower speed of light in glass.

Re:Posting doesn't match up with the speed of ligh

[Anonymous Coward]

Latency is to-and-from. Also, the path isn't direct. The sea floor is first mapped, and the route is planned to avoid natural obstacles. An example would be New York to L.A. is 2443 miles, but driving distance (according to Google Maps) is 2790 miles, a 13% difference. Ocean floors have mountain ranges, cliffs, tectonic features etc... that all need to be avoided.

The cable being layed is generally a one-size-fits-all design once it's in deep water, what with it being hundreds of miles long. It's cheaper to map and avoid obstacles, then design a cable that can cope.

out of context excerpt

[alienzed]

"billions of people could wake up" well that's certainly a reason NOT to do this.

Re:Posting doesn't match up with the speed of ligh

[mr_walrus]

fibre optic repeaters (amplifiers) had huge latencies (relatively speaking.)

Re:Posting doesn't match up with the speed of ligh

[MiG82au]

You must live in a vacuum if you've never pinged overseas and gotten a result longer than 2*distance/c. Also amazing is that you're not able to imagine why going through *at least* a half a dozen routers and many repeaters would slow the signal down.

In case you ever wondered how a sea cable is fixed

[bedouin]

See this.

Re:Couldn't we ban them from using it?

[rahvin112]

A 1ms reduction in communication time can be worth millions of dollars for stock traders in Britain. If you know about a change in stock prices on a foreign market faster than your competitors then you can react quicker. You might be thinking that 1ms isn't enough time to matter but because most trading is computer based these days 1ms can make a HUGE difference because computers are doing the trading.

Almost the entire cost of this cable is already paid for and it's stock brokers that are paying for it precisely because that reduction in latency can make them more effective than their competitors. Be happy that they are paying for infrastructure that everyone else will be using.

Re:Couldn't we ban them from using it?

[Casandro]

It's not like stock brokers somehow do something productive. All they _can_ do is to suck out money from somewhere or sometime else, sometimes even causing a _lot_ of damage doing so. So if we close the stock markets, or at least heavily regulate them, we'd all live better. Trim down the financial sector to the parts which actually benefit the population.

Re:Why focus on Trading when we talk about latency

[ThatsMyNick]

The only ones willing to pay a premium for the low latency are the HFT folks. I dont think, the masses who use VOIP, choose their ISP based on the ping time to UK (most go for the obvious bandwidth). I agree, it is a win for a lot of people, but it is paid for (atleast the initial costs) by High Frequency Traders.

Re:Posting doesn't match up with the speed of ligh

[isorox]

I really have no clue whether 230ms is a realistic number.

I currently get a 431ms Japan <> UK ping on a pretty mediocre Japanese ADSL line in the country side.
So, yes, that's realistic.

I imagine the route goes via the highly-congested south-east asia area, or possibly even via the U.S.

London to Tokyo is about 6,000 miles via Sibera. Via undersea cables through the red sea it's nearer 12,000 miles. Via the states it's also about 12,000 miles.

I haven't got any private lines to Tokyo, but my line to Singapore runs about 220ms IIRC.

Re:Not much ship traffic but if something does hap

[Neil Boekend]

One could repair them with a modified old sovjet era submarine.

Re:Posting doesn't match up with the speed of ligh

[SuricouRaven]

Not much in the way of amplifier latency. They are all-optical.

Re:Posting doesn't match up with the speed of ligh

[gl4ss]

and distance between tokyo and london (short) is just 5900 miles.

(but of course the cable doesn't go direct.. just saying that circumference of the globe isn't that useful to use in that)

Hosting @ Tokyo?

[coder111]

I am slightly confused. Unless you want to do arbitrage between London Stock Exchange & Tokyo Stock Exchange, why not host your algorithmic trading servers at Tokyo? I think these days stock exchanges themselves offer hosting for lower ping times...

Anyway, lower latency is always good, I don't really care if it's going to be used for HFT or not.

--Coder

Re:Hosting @ Tokyo?

[bjourne]

Because you want to do arbitrages between London and Tokyo? :) That's basically all HFT is about - finding which two exchanges values a stock differently and cashing in on the difference.

Re:Hosting @ Tokyo?

[nedlohs]

There's a small hitch with that plan:

http://en.wikipedia.org/wiki/List_of_market_opening_times

Re:Hosting @ Tokyo?

[Forbman]

LSE & TSE are both 24-hr electronic trading exchanges, right?

As someone working in Australia...

[dackroyd]

with a head office in the UK, I think this is awesome.

Currently the packets between Oz and the UK either go through central Asia, where there is massive packet loss, or they go the long way round - across the Pacific, across the USA and then across the Atlantic.

The new route will probably shave 40ms off the ping time from Oz to the UK as well as be pretty reliable - and also not subject to US data monitoring.

Re:As someone working in Australia...

[sociocapitalist]

"...and also not subject to US data monitoring."

Do you really imagine that the US and UK don't work together on this?

More coffee

[docilespelunker]

Any latency gain from a shorter cable will be dwarfed by the random caffeine deficiency induced latencies of the traders.

Surely swapping in a stronger brand of coffee would be vastly cheaper!

Re:In case you ever wondered how a sea cable is fi

[Anonymous Coward]

Good video here:
http://www.youtube.com/watch?v=m6qTk5WNq9E

Re:Why focus on Trading when we talk about latency

[MMC Monster]

Tele-medicine.

Or, more to the point: Tele-surgery.

Besides helping a few traders..

[Koos]

There is also the good side that this will bring serious bandwidth to places where dialup over satellite is currently the way to get a bit of Internet. Scarcely populated places in northern Canada and Alaska will appreciate the chances of a bit more bandwidth!

Re:Besides helping a few traders..

[Megane]

Scarcely populated places in northern Canada and Alaska will appreciate the chances of a bit more bandwidth!

...whilst crushing the hopes of all the people talking about how this new link will not be intercepted by US agencies. Not that it helps that the "Northwest Passage" areas tend to be the barely- to un-populated areas.

Re:In case you ever wondered how a sea cable is fi

[vinlud]

But how do you pull up a cable from the ocean floor when it has all kinds of other cables crossing it?

Everything you wanted to know about undersea cable

[hackertourist]

Neal Stephenson's essay Mother Earth Mother Board

Latency? We don't need no stinkin' latency

[hemo_jr]

Using neutrinos is positively slow compared to quantum entanglement communication. This would eliminate latency completely and allow the masters of the universe to do their trades even faster than OPERA thought their neutrinos were going..

Re:Posting doesn't match up with the speed of ligh

[petermgreen]

Unfortunately fibers don't run in straight lines from place to place and there are processing/routing overheads too. Even so based on my own test it seems the authors of TFA are making the newbie mistake of confusing one way latency with round trip time (round trip time ~= 2x one way latency).

Tracing route to www.jp [210.157.1.134]
over a maximum of 30 hops:

    1 1 ms 1 ms 1 ms gw-umain.ee.umist.ac.uk [130.88.118.250]
    2 1 ms 1 ms 1 ms gw-rh.its.manchester.ac.uk [130.88.250.14]
    3 12 ms 1 ms 1 ms gw-uom-rh.its.manchester.ac.uk [130.88.250.78]
    4 1 ms 1 ms 1 ms gw-man-rh.netnw.net.uk [194.66.26.105]
    5 10 ms 1 ms 1 ms so-1-2-0.leed-sbr1.ja.net [146.97.42.169]
    6 2 ms 2 ms 2 ms ae12.manc-sbr1.ja.net [146.97.33.157]
    7 2 ms 2 ms 2 ms ae1.man11.ip4.tinet.net [77.67.94.169]
    8 168 ms 168 ms 175 ms xe-4-1-0.sjc12.ip4.tinet.net [89.149.186.205]
    9 159 ms 159 ms 159 ms pacnet-gw.ip4.tinet.net [77.67.68.234]
  10 277 ms 277 ms 277 ms gi1-0-0.cr2.nrt1.asianetcom.net [202.147.0.58]
  11 270 ms 270 ms 270 ms ge-2-1-0-0.gw3.nrt5.asianetcom.net [202.147.0.182]
  12 279 ms 279 ms 279 ms GMO-0003.gw3.nrt5.asianetcom.net [203.192.150.246]
  13 274 ms 271 ms 271 ms c7-e-1-1.interq.or.jp [210.172.191.122]
  14 272 ms 273 ms 271 ms g-svc3-po-1.interq.or.jp [210.172.191.134]
  15 269 ms 269 ms 271 ms dfltweb1.onamae.com [210.157.1.134]

Trace complete.

So were are talking 270 milliseconds to get from my desktop at uni to a machine somewhere in japan AND BACK. Based on that the articles 230ms "current best case" figure is belivable as a round trip time but not as a one way latency.

A good thing too

[DrXym]

The latencies while downloading hentai and tentacle porn are crippling.

Re:Why focus on Trading when we talk about latency

[necro81]

People talk about this as a potential killer app, but the simple fact remains that doing telesurgery with round trip communication times of a few hundred milliseconds is simply a non-starter. Surgeons work on hand-eye coordination and, to a lesser extent, tactile feedback. Introduce a quarter-second delay into that control loop and you either 1) royally screw up your position/velocity/force control or 2) maintain control, but at glacial speeds. In either case, it is doubtful that you would have surgical outcomes that are so much better that they justify the enormous infrastructure cost.

Although demonstrations are done here and there of transnational or trans-Atlantic telesurgery, there are a host of good reasons why it hasn't been anything other than a novelty. Reducing latency from hundreds of milliseconds to... still hundreds of milliseconds isn't going to be the breakthrough that makes telesurgery a win.

Re:In case you ever wondered how a sea cable is fi

[necro81]

very carefully.

Need more cables!

[phik]

I was in South Africa in 2010 when one of their main cables got cut by a ship. It sucked. Internet got SLOOOOOWWWW

Re:Posting doesn't match up with the speed of ligh

[dean.collins]

it is...this guy doesnt know what he is talking about.

Re:Not much ship traffic but if something does hap

[Megane]

I think the idea is that (evilvoice) GLOBALLLL WARRRRMING (/evilvoice) will make it easier to get in there to fix things. But if the melting up there was really caused by the PDO, then they're going to be unpleasantly surprised.

On the other hand, it also means a lot less ship traffic that can drag anchors into the cable.

Re:Latency? We don't need no stinkin' latency

[nitehawk214]

Using neutrinos is positively slow compared to quantum entanglement communication. This would eliminate latency completely and allow the masters of the universe to do their trades even faster than OPERA thought their neutrinos were going..

Yeah, but it has the advantage of actually being possible.

Re:Latency? We don't need no stinkin' latency

[nitehawk214]

Using neutrinos is positively slow compared to quantum entanglement communication. This would eliminate latency completely and allow the masters of the universe to do their trades even faster than OPERA thought their neutrinos were going..

Yeah, but it has the advantage of actually being possible.

Also I didn't know He-Man was a stock trader.

$1.5 Billion for 60ms less time?

[martinQblank]

That lends credence to the time is money theory.

Stock Exchange should switch from RTS to turn-base

[faquino]

Something must be wrong if forces driving global economy depend on a 60ms ping difference.