Early pioneer in delivering ultra-low latency transmission systems unveils its position in HFT market’s drive to replace fiber
CAMPBELL, Calif. — June 24, 2013 — Exalt Communications, Inc., the leading innovator of next-generation wireless connectivity systems for private networks and Internet infrastructures, spoke today for the first time about its early development of ultra-low latency microwave systems driving the evolution of financial trading networks to support high frequency trading (HFT). Already widely known and respected in telecom and other wireless networking markets for its low latency, high performance, and highly reliable microwave backhaul systems, Exalt was approached in 2010 by financial trading network operators interested in microwave as a better alternative to fiber for transporting data at very high speeds. Improving on fiber’s speed with ultra-low latency was a natural next step for Exalt. The company, founded in 2004 and whose technical staff collectively has over one thousand years of microwave experience, not only developed the breakthrough technology that exceeds fiber’s near-speed of light, but delivered its ultra-low latency systems to these network operators at 1/10th the cost of fiber.
“In high-frequency trading, where being ahead of the competition can mean profits worth millions, every microsecond shaved off a trade can make the difference,” said Amir Zoufonoun, CEO of Exalt. “Microwave delivers this competitive edge. It’s faster than fiber’s near-speed of light, can go where fiber cannot over the shortest distance between two points, and it does all this for less cost. When we decided to apply our microwave expertise to this unique market, we committed for the long-term, recognizing that our unique expertise would allow us to make a significant contribution to the evolution of HFT networks by delivering the ultimate in speed, reliability, and flexibility.”
HFT and the Need for Speed
The biggest driver of high frequency trading has been the growth of market participants and fragmentation of exchanges, creating dozens of venues quoting the same securities and resulting in massive amounts of data to review. Estimates state that more than 50 percent of all equity-trading volume in the U.S. is executed by high frequency traders, and global market estimates top 35% and growing. HFTs do not trade entire markets, but only a subset of symbols, funds, or contracts, with tens of millions of dollars at stake each day. These traders make money a fraction of a cent at a time, multiplied by hundreds of shares, tens of thousands of times per day, and the opportunity to make money may exist only for microseconds. HFT applications support the rapid turnover of positions through the use of sophisticated trading algorithms, which process hundreds of trades in fractions of a second on the basis of changing market conditions.
Positions are often held for an extremely short time, with no positions remaining at the end of the day. The faster a trading application responds to market signals - completing an analysis, arriving at a decision, and sending a market order - the higher the chances of getting an order filled. The ratio of orders filled to orders unfilled is a common metric for gauging the success of a given algorithm and infrastructure. To beat their competition, traders must identify and act more quickly on opportunities, and that translates to the need for speed. If a computer algorithm can spot a millisecond-level opportunity in which a stock is – instantly – worth more on one exchange than another, it can make quick money.
Microwave vs. Fiber
In the past, increasing trading network speed focused on various parts of the network infrastructure including switches, software, TCP offload devices, and other components. But to support HFT, obtaining and acting on real-time equities, options, and other financial information microseconds faster than competitors is paramount. For these networks, with trading and information centers often separated by hundreds of miles, the goal is ultra-low latency, and variations in transmission delay can make millions of dollars’ worth of difference to high-frequency traders.
While fiber can deliver adequately high speed over short distances, such as found within a data center building, it suffers latency delays of about eight microseconds per mile over longer distances. For example, for one of world’s most popular routes from Chicago to New York, typical round trip latencies with adequate transmission capacity measure around 16 milliseconds for premium “dark fiber” service (a connection that doesn’t have to be shared with other customers).
Microwave, on the other hand, is nearly twice as fast as the speed of fiber over long distances, making wireless transmission the ideal choice for trading, not for the entire market but for a select group – such as HFT traders – with a clear strategy and algorithmic tools who can truly benefit from the faster transmissions. Microwave’s advantage over fiber stems from two factors. First, microwave links are shorter, because signals can be beamed across the most direct path between two points, while fiber routes are usually much longer due to rights-of-way restrictions. Second, since electromagnetic wave transmission speed is inversely proportional to the density of the medium, microwaves are naturally faster than fiber optic waves due to the higher density of glass vs. air. In the Chicago - New York example, the currently installed Exalt microwave systems transport data at 8 milliseconds round trip vs. the fastest fiber network at 13.1 milliseconds. Furthermore, while fiber has already reached its minimum potential latency, microwave technology continues to evolve toward even lower latencies.
Not All Microwave is Equal
Once microwave has been chosen over fiber, the very next consideration is to choose the microwave radio vendor and type of systems. With the goal of minimizing the overall latency for a particular route, network planners must simultaneously seek to minimize the number of microwave links and the average latency per link, while maximizing system availability and transmission capacity.Other parameters in network planning are the choice of frequencies, site-specific conditions, and equipment configurations.
To optimize this set of complex, interrelated parameters, Exalt has applied its advanced DSP and RF technologies specifically geared toward ultra-low latency designs. The company’s unique technology, Exalt Adaptive Latency Control, is a breakthrough approach to slashing latency in HFT networks with superior ease of deployment, diagnostics, and economics. (For more specific information, refer to related press release at www.exaltcom.com/HFT-ALC.aspx).
To support the growing needs and the evolution of HFT networks over the long term, Exalt offers, in addition to ultra-low latency, the greatest flexibility in frequency band selection, radio form factor, noise characteristics, reach, and availability to create the optimum network path over hundreds of miles.
About Exalt Communications
Exalt Communications, Inc. is a forerunner in the global Internet revolution, delivering high-value wireless systems that transform the economics of connectivity. Exalt wireless systems extend or complement network fiber and replace now-outdated copper, enabling customers to accelerate time-to-market, optimize network performance, and reduce network infrastructure costs. Today, over 2,000 global customers, from the world’s largest mobile operators to independent service providers, government agencies, and multinational enterprises depend on Exalt systems as they move their applications to the Cloud, enable mobility, and connect the unconnected. Learn more at www.exaltcom.com