Kabeltje leggenThere’s a new episode in the speed race among the top HFT shops. The Express cable under the Atlantic ocean by Hibernia Networks is finally finished. It has taken years longer than expected, but now it’s pretty fast. It takes 59.5 58,95 milliseconds for a round trip across the Atlantic ocean. That’s six milliseconds faster than the former speed king, the Atlantic Crossing 1 line of Level 3 Communications.

As usual, time is money. The high speed cable rent will set you back for $20 million for five years. That’s $333k per month. A slower version (62,5 ms) is only $35k a month. The 59.5 line (which is in reality 58.95) is guaranteed by Hibernia. If they fail to deliver, you’ll get your money back.

Prisoners dilemma

To be honest, such a fast cable connection isn’t contributing much to the general welfare. Utility is zero. That’s why all HFT shops declined the offer. They figured correctly higher speeds won’t mean a thing, if everybody else has it. Just more expenses. Future for the planned cable wasn’t very bright, with all HFT firms closing the ranks and refusing to sign up. Without clients and upfront payments, it would be impossible to finance the cable.

NSA to rescue

Turned out the HFT firms weren’t the only ones interested in fast connections. The NSA and the US Army decided to sign up for the cable. They became key investor, and made financing for the cable possible. The pact of HFT firms to boycott the new Express cable broke down. Thanks to the NSA, all HFT firms were forced to pay down the $20 million. Pay in advance. Any HFT firm not using the fast Express line would be out of business. Their competitors will use the line.

Why NSA and the US Army would want to be a mere six milliseconds faster than the previous cable is beyond me. Maybe it’s because of the drone age. Or maybe the Hibernia sales men chuckle how they made up a fantasy NSA story and tricked all HFT’s into paying millions. Who knows (well, maybe @Snowden knows).

Usual suspects

It only takes 14 paying customers for the Express cable to reach break even. All the usual suspects will have paid for the fast line. Without it you can’t run a high frequency trading operation – you would be a algo shop (nothing wrong with that). According to Hibernia CEO Bjarni Thorvardarson firms from France, The Netherlands (duh), UK, Canada, US and Germany have signed for the rent of the cable.

Some household names will be on the list (Virtu, Jump, Optiver, DRW etc), but also some lesser known firms will have signed. There are firms without even a website active in the HFT world. Also, I bet at least one of the two top Israel trading firms, Final and Barak Capital, will be one of the happy customers. Like the Spread Networks cable, sharing bandwidth won’t be allowed. For in-depth research on the low latency business, we just have to wait for Alexandre Laumonier (the Sniper in Mahwah) to return from holiday.