High Speed Traders Employ Lasers to Trade Ahead

“As high-speed stock traders push to trade ever faster, their newest move involves harnessing a technology that U.S. military jets use to communicate as they soar across the sky: lasers.

In March, a small Chicago communications company plans to switch on an array of laser devices linking the New York Stock Exchange’s data center in Mahwah, N.J., with theNasdaq Stock Market‘s NDAQ +2.29% data center in another New Jersey community, Carteret.

The lasers, perched atop high-rise apartment buildings, towers and office complexes along the 35-mile stretch between the communities, are the first phase of a grid intended to link nearly all U.S. stock exchanges this way, zipping market data and rapid-fire trades.

It is the latest salvo in the “race to zero,” traders’ term for their efforts to whittle away the difference between the speed their orders travel at and the speed of light. Zero, the point at which that difference would disappear, has become a kind of holy grail to computerized traders, for whom nanoseconds—billionths of a second—can spell the difference between profit and loss in their algorithm-driven trades.

In recent years, so-called high-frequency trading firms, which account for about half of U.S. stock trading, have adopted first custom-built fiber-optic cables, then microwave and later millimeter-wave transmissions. Networks built on all three technologies operate today, tying together exchanges around the U.S. Internationally, fiber-optic cables laid across the oceans link America’s markets with Europe’s and Asia’s….”

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