A random thread on a deep, dark, but super interesting rabbit hole in the exchange world: network & connectivity technology. Or, put differently: The multi-million $ millisecond war:
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A gargantuan piece of an exchange’s economic moat lies in its technology – the average person can’t simply spin up some servers and expect to compete. CME alone spends ~$200 million *per year* to improve & refresh its technology (below from its 2019 10-K):pic.twitter.com/cZAV7fY39i
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Where does all this money go? Primarily, data centers. These massive, sophisticated buildings house the trading servers & supporting equipment. CME’s multi-billion dollar marketplace takes place in these buildings – below is a picture of its flagship data center in Aurora:pic.twitter.com/2z5Vj05nK0
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Land surrounding the data centers have become just as important as the sites themselves. HFT firms pay millions to buy up adjacent land and install high-tech equipment to grab fastest connectivity to the exchange. Below are some Bloomberg headlines covering the drama:pic.twitter.com/wFZu7ggkhX
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The stories are fascinating – elite trading firms spend fortunes building and blocking competitors to get faster trades, and spend years locked in lawsuits with each other to get an edge. Even local politicians in Aurora have become players as firms work to gain favor.
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To put into context how fast a millisecond is: In the time it takes you to read this tweet, ~8,000 milliseconds have passed. Exchanges can turn losing trades into winning ones by shaving off just 1 millisecond from their trading speed.
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If you really want to get into the weeds with this stuff, below is a link to a great presentation in 2018 on network technology & how trading firms are jockeying with each other around the CME data center: https://stacresearch.com/STAC-Summit-13-Jun-2018-shortwave-trading …pic.twitter.com/qcLvWmTulm
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Also, give
@SniperInMahwah a follow. His blog has some great posts on the extreme details of exchange connectivity & network technology used by these firms to trade.Show this thread
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Can we achieve speed and scale for HFT using cloud like AWS? Sorry for noob question, very curious
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