speed is the strategy
‘The companies engaged in this relatively new practice, called high-frequency trading, are keenly aware of the importance of timely information about markets. And they use enormously sophisticated technology to wring out every last bit of delay—down to the microsecond level or even less—in getting that information and in executing their trades. A few years ago, hundreds of millions of dollars were spent on a project to connect traders in New York and Chicago with an especially direct data link, and similar amounts are being invested now to hook up New York and London in the fastest possible way. These are just of couple of the most obvious investments in a multibillion-dollar game where advantages measured in millionths of a second can mean millions in profits.
The New York Stock Exchange, at 11 Wall Street in lower Manhattan, might seem the epicenter of U.S. stock trading. In fact, the real action takes place about 50 kilometers away, in a huge, windowless building in suburban Mahwah, N.J. NYSE Euronext opened a 400 000-square-foot (37 000-square-meter) data center there in 2010. This is where the New York Stock Exchange houses its “matching engines”—servers that link together a vast number of buy and sell orders coming in from traders. It’s also where the exchange leases space to companies that want their computerized trading equipment installed as close as possible to these matching engines so as to limit signaling delays, both in receiving market information and in executing trades.
“Everyone routes through the same set of switches, the same core network, the same local area network, and then [the data] is delivered at the same speed to each colocation customer’s top of rack, wherever they are located—no one has an advantage,” says Don Brook, global head of infrastructure for the NYSE. “The last piece of secret sauce to make that happen isn’t really that secret: Every cable is the same length, whether you are 10 feet away or 500 feet away.”