HFT: When The Speed of Light Isn't Fast Enough

December 18th, 2012
in econ_news, syndication

Econintersect:  While everyone thinks of fiber optics as the fastest high bandwidth medium available, microwave transmission is actually faster.  This has important implications for transmitting large volumes of data over longer distances, say from New York to Chicago.  Today (17 December 2012) an article in Wall Street & Technology reports that recently microwave networks have been recognized as a "faster alternative to to optical transport for ultra-low latency financial applications."  The article states that the speed advantage for microwaves, compared to fiber, is significant for high frequency trading (HFT) operations.


Follow up:

The difference comes down to one factor:  the index of refraction of the glass in the fiber.  From Wikipedia:

Latency is largely a function of the speed of light, which is 299,792,458 meters/second in vacuum. This would equate to a latency of 3.33 microseconds for every kilometer of path length. The index of refraction of most fibre optic cables is about 1.5, meaning that light travels about 1.5 times faster in a vacuum than it does in the cable. This works out to about 4.9 µs of latency for every kilometer.

Over shorter distances, say between buildings in the same city, fiber latency is often slightly higher.

Microwaves, on the other hand, are transmitted directly through air from point to point, which can shorten the transmission distance since fiber must be physically routed up, down and around various obstacles.

However, the biggest advantage of microwaves is the speed of light through air.  The refractive index of air is about 1.0003 so the speed of transmission for microwaves is nearly approximately 33% faster than for light through fiber.

Stated differently, the latency for microwaves is approximately 2/3 that for fiber.

So the headline is misleading.  The speed of light is a constant and thus it must, by definition, be fast enough.  It is the transmission mode that allows (or inhibits) the full speed of light to be realized in practice.  And that is where transmission through air beats transmission thorugh glass.

Editor's note: The author of the article at Wall Street & Technology, Travis Mitchell, is an employee of Aviat Networks (NASDAQ:AVNW), a microwave networking solutions provider.

John Lounsbury


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