Plan to speed up transatlantic share trading
- By Philip Stafford in London
Two telecom companies have claimed they will build the fastest trading connection between London and New York, a development that highlights growing demand from investors for high-speed trading between the world’s financial centres.
The link, which will cut about six milliseconds, or thousandths of a second, from existing speeds, is the work of Reliance Globalcom, part of the Indian telecoms group, and Perseus Telecom, a small Irish company.
The project reflects a race to meet the growing demand to provide hedge funds and banks with the fastest possible trading times around the globe. Investors are pushing geographical barriers to eke out tiny advantages and exploit small discrepancies in prices of the same assets on different exchanges and trading venues, a practice known as high-frequency trading.
Fibre-optic cables have not been laid under the Atlantic for a decade but new cables between London and New York are due to come into operation next year, costing around $300m.
The cable from Reliance and Perseus will use an existing cable owned by Flag Atlantic, which floats 3km below sea level between Long Island, New York and Land’s End in Britain. Those depths are below those at which commercial trawlers and submarines operate.
It takes about 65 milliseconds to trade between London and New York. New equipment on the ends of the line, say the companies, will shave milliseconds off that time. The second part of the project, in which cabling will be replaced and which will be completed this year, will take times below 60 milliseconds.
Some high-frequency trading firms have complained that the high cost of new cables has been passed on to customers. Manoj Narang, chief executive of Tradeworx, has labelled them "a gigantic tax on the industry".
A link between London and Hong Kong opened last year cut a round trip between the two financial hubs to 176 milliseconds.
Internet and trading services to Egypt and the Middle East were hit in 2008 when a cable outside Alexandria was damaged, it took nearly two years to repair it.
