Posted on Sep 28, 2015 at 4:57 PM
Baptized “Hibernia Express”, the new fast channel of information between London and the United States (New York, Chicago) has been operational for a few days. Designed by technology company Hibernia, a 4,600 kilometer submarine cable will be 5 milliseconds faster, an eternity in high frequency trading (THF), compared to competing networks. The round trip of an order between London and New York will take 59.5 milliseconds and 74 milliseconds between Frankfurt and Chicago. The two major financial centers (equities, currencies, etc.) on the planet, London and New York, have never been so close. Traders will be able to earn money on the tiny price differences that may exist between, for example, the euro-dollar listed in London and New York. A “geographic” arbitrage which abolishes the borders between foreign exchange markets and makes them much more synchronized and therefore efficient. Another possibility, traders will be able to earn money on the price differences between an American Depositary Receipt or ADR, a foreign share but listed in the United States, and this same share but listed on its home market in Europe.
5 milliseconds
Saving 5 milliseconds on the journey between London and New York will cost the modest sum of 333.333 dollars per month, or $ 20 million for 5 years of use, according to the Bloomberg agency. Only leading THF firms (Jump Trading, Optiver, KCG, etc.), which process large volumes on both continents, can make this subscription profitable. Will THFs that use other slower networks all switch to the Hibernia system or see their profits wiped out? Each millisecond of additional speed costs more and more, given the technology (fibers, microwaves, etc.) and the necessary infrastructure investments.
Cyber warfare and information
The Hibernia “Express” project cost more than $ 300 million. This is the equivalent price of the network that was designed in 2010 by Spread Networks and whose purpose was to accelerate the speed of transmission of orders between New York and Chicago. Hibernia was suspended in 2013. The reason? The United States feared that the Chinese subcontractor of the project, the company Huawei, was a little too close to Chinese military and political circles. Clearly, they felt that there was a risk that all information circulating in this network would be intercepted by China as part of the global cyberspace war. “The authorities decided that any American company working with Huawei would no longer obtain any market on American soil, which prompted Hibernia to change supplier, in favor of Emerald Networks, which then announced a new equally powerful cable for the summer. 2014 “, recalls in his work
-Alexandre Laumonier, researcher, anthropologist and one of the THF specialists in France.
