HFT (not) in the Banana Land | Part 4

This blog has been quite silent for a while (too much bloody work) but that does not mean the “HFT in the Banana Land” series is finished. Quite the contrary: what was dubbed “The Case of the Small English Town vs The Large HFT Tower” by Themis should be renamed “The Case of the Small English Town vs The Two Large HFT Towers” as there is now a fierce battle between Vigilant Global/DRW and New Line Networks (KCG/Jump) in Richborough, each firm seeking to build a 300-meter mast in the same area, as close as one kilometer apart – a third (and concerned) party recently said in Chicago: “It’s crazy”. What was going on the last weeks around the Banana Land (and in Belgium) is captivating; a lot has happened and it’s hard to summarize, but I’ll try to make a not-too-long and clear summary on the current situation in in the next episode.


Vigilant Global and New Line Network in Richborough, where the Eiffel Towers battle is going on.

(By the way, when Themis’ Joe Saluzzi posted “The Case of the Small English Town…”, his tweet was liked by @RemcoLenterman and retweeted by @nanexllc, and that is real a tour de force. Congrats Joe, being endorsed by both Remco and Nanex is a quite a challenge).


All the HFT firms (Vigilant, Optiver, etc.) or microwave providers (Custom Connect) having a network between London and Frankufrt have to deal with at least two different locations in London (LHC and Interxion aside): Basildon (where the ICE/NYSE/Euronext exchange is located) and Slough (the Equinix LD4 where the matching engine of, for instance, BATS (ex-)Chi-X, is located). In the London metro area waves are not micro (MW) but millimeter (MMW). MMW are faster than MW but they are not good for long distance transmissions due to higher signal loss, so a path between two points is several kilometers only (compared to a 100-kilometer path you can get with MW). That means there are a lot of MMW dishes between Slough and Basildon. And that means every location is important if you need, let’s say, to build a mast. According to the McKay Brothers website, it takes less than one millisecond for a MMW signal to travel between the two data centres (273 microseconds exactly). Every microsecond counts.

Capture d’écran 2016-07-26 à 09.47.26

Microwave networks in London. Straight paths are in white. (Note that this map is not up to date)

Back in February 2013, Equinix decided to erect a 25-meter mast next to their data centre. The planning application is there and this part is interesting: “The Equinix worldwide network of data centres and international business exchanges are currently connected by fibre optic cables. However within the UK in recent years, metal and cable theft has extended to almost epidemic levels. In the last couple of years, this has become one of the fastest growing national menaces with the Home Secretary and HM Treasury estimating the annual cost to industry to be in the region of £1bn for just the replacement of the metal/cable. These numerous fibre cuts have caused both Equinix and its customers, particularly in the UK 
financial services sector, a significant reduction in speed of service which, considering the UK as one of the most globalized economies in the world and The City of London as one of the world’s three command centres of the global economy, is unacceptable. Indeed with financial services contributing such a large proportion of the UK’s GDP, any slow down or potential disruption to service is of national importance. Consequently many of Equinix’s customers are now implementing a wireless network to avoid any such outages and the subsequent loss of important services and reduction to GDP.” If I understand correctly, the high-frequency traders decided to use wireless networks because some villain cable thieves reduced UK’s gross domestic product… Good story.

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High-speed traders on the Equinix/LD4 data centre mast

The application includes an interesting document I missed when I started to investigate the HFT networks, a document with the names of the different “operators” who put (or were supposed to) dishes on the Equinix mast:

Capture d’écran 2016-07-26 à 11.09.01

As expected we meet familiar names: Vigilant Global, Jump Trading, Global Connect/Flow Traders, Getco – now KCG –, Custom Connect, and Virtu Financial – but it seems Virtu never built a proprietary wireless network in Europe. I don’t know who is TTX – TTX Trading LLP, an English company dissolved in 2015? or this other TTX Trading? Whatever. Note that this table, dated 2013, does not include other familiar names/operators/firms such as McKay Brothers, Optiver or Tixos. Tixos is an interesting case. They play the Slough-Basildon route only, they don’t have the full London-Frankfurt network, so my suspicion was: Tixos is more interested by equities than derivatives. Tixos was the only network I could not identify when I started to figure out who were the very low-latency actors sending waves above our heads. Tixos did not seem to be a trading firm nor a publicized micro/milli/waves provider. I suspected Tixos to be a private wireless provider working for a single market maker/high-frequency trader (and I was right). But the public data about this UK company does not mention names related to trading. Since tixos means “wall” in Greek, I thought the firm behind Tixos was from Wall Street (and I was wrong). I asked around to my industry contacts, some of them knew the answer but didn’t want to tell me (that’s the usual and fun game between them and me: I have to find information myself ;). At some point I got a lead from London saying “Look at the Modern Markets guys”. Funny.

So, Equinix erected a mast and rented spaces to different HFT-related companies. But some other exchanges didn’t, perhaps because they have high roofs (pure speculation) like the Deutsche Börse one in Frankfurt:

The roof of the Deutsche Börse data centre in Frankfurt at night. Thanks to [censured] for the photo.


It is the same in Basildon, as can be seen in this photography twetted by a financial engineers (there are far more dishes on this roof now):

Capture d’écran 2016-07-26 à 13.43.42

I visited Basildon twice but the array is at the center of the roof – once I was there with (bad French) TV journalists and I asked them if they could bring a drone so that they could shoot the dishes, but they refused – too bad. Now let’s talk a little bit about sport. Because the HFT firms love sport. Here is a map of the eastern area around Euronext:

Capture d’écran 2016-07-26 à 14.47.31

Two sport centres are in this area: the Basildon Sport & Leisure Club and the Basildon Rugby Football Club. Back in August 2013, Jump Trading filed a planning application to build a 20-meter mast on one of the Basildon Sport & Leisure Club fields – if you don’t find buildings or towers available exactly where you need to, you just have to build your own facility. The bearings at which the dishes are proposed to be installed would reflect the direction of the microwave transmission links and facilitate high speed data transfer from overseas across the United Kingdom, enabling UK based businesses to be more competitive in the global economy”.

The Jump Trading 20-meter mast in Basildon

The Ofcom licences granted to Jump in 2013 (and to New Line Networks in 2015) shows the path from this new mast to the Euronext data centre, and three possible paths going to Slough:

The site owner has future plans to re-develop the site, and therefore only a 2 year lease has been agreed for the proposed telecommunications equipment” Jump stated. That’s true: the firm filed a new application in July 2015 (“Renewal of planning permission”, etc.), and said again that “the property owner has future plans to potentially re-develop the site.”

In the meantime, in October 2014, another HFT firm showed interest for the local sport centres and filed an application to build a 35-meter mast (15 meters higher than the Jump one) on the Basildon Rugby Football Club ground. The name of this competitor? Vigilant Global. What is happening in Richborough nowadays is only a sequel of what happened in Basildon before – but with higher towers. Vigilant stated in the document that “with this site, Vigilant Global is committed to contribute to the community through its compensation of the local Rugby Club… should this application be rejected, the negative impact on Vigilant Global’s financial returns would have a similar impact on the local community through a trickledown effect… there is an existing 20 metre lattice tower of a similar nature to this proposal sited approximately 300 metres north of the site within the grounds of the Selex Sports and Leisure Club” – hello Jump – but Vigilant added that the Jump mast was an “unsuitable structure for the proposal as it is too low, therefore, the required line-of-sight for the network path will not be achievable” (note that Vigilant never writes the unsuitable mast is owned by a competitor – discretion is advised). With this new 35-meter mast in Basildon, Vigilant is getting closer to the perfect straight line between Basildon and Slough. Nice done.

Jump and Vigilant in Basildon. Straight line between Basildon and Slough in white.

The local landscape should look like this now:

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Before HFT. After HFT.

(Compared to the high and very elegant guyed tower, this little tower is quite ugly but it’a matter of personal taste). But this is not the end. In January 2016 Jump decided to fight back and filed a new application (through New Line Networks), saying that they wanted to improve their mast: “Temporary permission is now required for a larger structure to improve the network and provide a new link for a limited period”. “Larger structure” means the new mast would be 34-meter high (1 meter less than the Vigilant tower, though). The residents living around the Banana Land will love this part: “On 5th February 2015 planning permission was granted for a 35m high lattice tower with 4 no. 0.6m diameter telecommunications dishes, 1 no. equipment cabinet and ancillary development” – the Vigilant mast. “Consideration was given to sharing this site” – did Vigilant and Jump/NLN have a little discussion? “However, as the landlord has signed exclusivity contract with the tenant [Vigilant] the site is not available for a site share” – too bad. End of the story. (In April 2016 Jump/NLN withdraw the application, it seems they gave up on heir new mast).

Some of those little towers are temporary and will be removed when/if the HFT firms find some better locations/paths. But the 300-meter masts Jump/NLN and Vigilant seek to build around the Banana Land will be there to stay (at least for 25 years). It’s quite a different story. We are unwilling to support any mast there and suggest it goes somewhere like the garden of Goldman Sachs CEO!!” wrote a resident of Richborough in a comment. Thbattle will be fierce. Stay tuned and happy summer.

The unknown wireless network going to Wall Street

No, it’s not a scoop. I didn’t find a new wireless [microwave or laser or whatever] network around Wall Street. In 2016, “Wall Street” means New Jersey as most of the Wall Street exchanges has moved into data centers far from the old New York Stock Exchange building. The NYSE’s matching engine is in Mahwah; BATS and Direct Edge’s matching engines in Secaucus; and Nasdaq’s matching engine in Carteret. This area is now known as “The Equity Triangle”. This Equity Triangle is quite interesting; thanks to millimeter waves and laser networks, prices are moving fast – very very fast, we talk about microseconds here. For instance it only takes 94 microseconds for data to be sent from Carteret to Secaucus, and given that it takes only ~1 microsecond for a co-located trader at one exchange to get news of a fill (order confirmation), each microsecond counts. We are in a very latency-sensitive area. An ongoing study on this Equity Triangle tends to show that because Secaucus is situated centrally between Carteret and Mahwah, trading at BATS/DE seems to drive price formation in the triangle. More to come about that.

The Equity Triangle, 2016

The controversy around the “speed race” has been revived in recent years as new kind of technologies (microwaves, laser) are now used by high-frequency traders to get information (market data) at “the speed of light”; for some this “speed race” is seen as “socially wasteful”, but others argue that those new technologies allow a better (and faster) arbitrage between price differences (particularly in the Equity Triangle as – for instance – Apple share prices may be different in Mahwah, Secaucus and Carteret). The recent projects of HFT firms Vigilant Global and New Line Networks (KCG + Jump Trading) in Richborough, UK, where both the companies seek to build two microwave towers as high as the Eiffel Tower, are more controversial than ever (check out my “HFT in the Banana Land” series). But wireless networks being faster than fibre, microwaves seem to be the “new normal” if you want to trade fast between major stock exchanges (the microwave race is nearly over here in Europe, the new horizons are in Asia and India now). Wireless networks linking exchanges are here to stay, and it appears they are older than we may think. By chance, a few days ago I discovered the first wireless network that transmitted informations to Wall Street. It was not around 2010 (when the first microwave communication system was set up between Chicago and New Jersey) but in… 1827. Almost two centuries ago.

In 1827, the Merchants Exchange Company of New York (NYSE before it was named NYSE) received a permission from the Tresury Department to deploy an optic telegraph from Navesink to Manhattan, using semaphores (as did the well-known Claude Chappe optic telegraph in Europe). The starting point of the network was at the Twin Lights Tower in Navesink, where a semaphore tower was added near the lighthouse. 

The Navesink Twin Lights Towers © Google

One of the Navesink lighthouse, 2014 © Google

From the Navesink 70-feet high lighthouse located on the hill (a second lighthouse was erected mater), an agent was able to monitor the boats entering the Lower Bay using a telescopic devices. The agent could identify the name, size, signal flags, etc., of the boats, and that information was important for the Wall Street traders. If a ship laden with commodities was not in a good shape and lost some of its goods, this valuable information was awaited with impatience around Wall Street; the sooner information reached the Exchange, the sooner commodities prices changed.

Agents in the Navesink monitoring boats with telescopes (around 1838).

Data coming from the agents was “coded” into semaphore flags on the tower erected near the lighthouse:

The Navesink lighthouse and the semaphore tower. Illustration from Frank Leslie’s “Illustrated Newspaper”, September 20, 1856

In this book we can find details about the way data was coded (unfortunately I was unable to find a copy but it seems that a single data – a letter – was a 10-bit encoded message, 9 bits more than the very first optic network – Troy-Mycenae – I wrote about before).

Then data was sent to another tower that was built set around the Sandy Hook lighthouse:

From Sandy Hook information was sent to Fort Wadsworth, in Staten Island:

Here is an old illustration of the semaphore tower in Staten Island:

The Staten Island semaphore tower in 1838, “apparently the first illustration of telecommunications in the United States”. (From “Semaphore to Satellite”, a report published by the International Telecommunication Union in 1965.)

The last path was between Fort Wadsworth and the New York Stock Exchange in Manhattan:

The full wireless network going to Wall Street from Navesink looked like this:

It was a 35,9-kilometer network (22,3 miles), roughly the distance between Secaucus and Mahwah, and it took 60 seconds for a message to arrive to the roof of the NYSE Manhattan from Navesink – an eternity compared to the HFT latencies (roughly calculated, if the network was set up in 2016 with microwaves dishes, a signal would travel in 120 μs between Navesink and Manhattan, that is 0.00012 seconds – but note that the old optic network was not really optimized as it’s far from the straight line between the two points).

As usual, a new technology came up, in 1853. That year the Morse code arrived around the Twin Lights and the semaphore device (but not the tower) was replaced by an electric telegraph – “new technology” meant “a faster network” as the electric wires were incredibly fastest than the prehistoric optic network. We will have to wait till the 21th century to be back on wireless (microwaves), and the irony is that the first demonstration Guglielmo Marconi did in the US in 1899 to prove the efficiency of radio networks, using Tesla’s oscillators, occurred on the Navesink hill: Marconi choose the Twin Lights location “because of the height. The hill here at Navesink had an excellent unobstructed view of the race course, and the early wireless were what they call line-of-sight radio waves. If the two ends couldn’t see the other, electronically they couldn’t communicate. So they needed to put the antenna on a high hill that had a direct visual line with the boat that Marconi was on” (read the full story here). Interesting to see that the technology “invented” by Marconi  (information transmission through waves – the new normal in the HFT world) was tested exactly where the first wireless network dedicated to market data was set up with semaphores, six decades earlier.

Guglielmo Marconi’s radio antenna in Navesink, 1899.

Last amazing detail: when this first wireless market data network was built  between Navesink and Wall Street in 1829, the New York Stock Exchange was not located on 55 Wall Street (its current unofficial address – the official one is now 1700 MacArthur Boulevard in Mahwah) but on 40 Wall Street. Back then the NYSE members rented a place for 200$ a month to trade, but the building was destroyed by the Great Fire of New York in 1835.

Now, guess what is on 40 Wall Street? A tower. When this tower was erected in 1930 it was the tallest building in the world… for a month – typically the kind of building HFT microwave providers love. But as the US exchanges are now in New Jersey (or around Chicago), there is no need for high towers in Manhattan. The old New York Stock Exchange building on 40 Wall Street, where the first wireless market data network was set up, has been replaced by a business tower. And who owns the building? Donald Trump. Times have changed.

The Trump Tower on 40 Wall Street, where the NYSE was located in 1829.



The Tower of Panama

Photo from the Registro Publico de Panama website. “Transparence – Quality – Technology”

Photo from the “Registro Publico de Panama“ website. “Transparence – Quality – Technology”

On November 3, 2014, I released the fourth episode of HFT in my backyard. Back at that time I was still discovering the amazing world of microwave (a technology that seems to be the fastest way to carry data between different distant exchanges) and I was still trying to figure out who were the different competitors in this not-so-secret area. I quickly understood that we have two types of competitors: proprietary firms and/or marker makers like Optiver, Vigilant Global, Jump Trading, and microwave providers like McKay Brothers or Custom Connect – these providers lease their networks to proprietary firms, trading desks of banks, etc. That’s how I came across a pseudo-secret firm located in Panama named Mossack-Fonseca, which is very famous now – and it is well deserved– thanks to the Panama Papers leaks. The Mossack-Fonseca tower in Panama is the place where an off-shore tax haven meets high speed trading.


The Mossack-Fonseca tower in Panama City

In November 2014 I parsed the  French radio regulator website (Agence nationale des fréquences) and I found the different firms I wanted to catch (including their legal postal addresses) but an unknown name showed up: Latent Networks. I checked the public records containing all the French radio operators and I realized the Latent postal address was in Malta – that was quite exotic for a HFT-related firm as most of the other microwave operators (McKay, Custom Connect) are incorporated in the countries where they have activities (The Netherlands, France, Swiss for instance). On the official Malta Registry of Companies I found the firm Latent Networks (incorporated in 2012), I spent a dozen of dollars to buy the “certificate of registration” and I suddenly I jumped from Malta to Panama, as the two shareholders of Latent Networks Limited are a firm named Invest Group Ltd and another firmed named Amicalle Corp., incorporated in Marbella East 54th Street 3A, in the city of Panama, the postal address of Mossack-Fonseca.

So I registered to the Registro Publico de Panama to find more data about this Amicalle Corp., and then I discovered the wonderful and amazing world of Mossack-Fonseca. According to the public data, Amicalle Corp. has two shareholders, Dubro Limited SA and Aliator SA, and different directors. Both Dubro Limitad SA and Aliator SA have the same directors (some are directors of Amicalle too), and both Dubro and Aliator have the same shareholders, Cheswick Inc. and Eastshore Inc, one director (Yenny Martinez) of both Cheswick and Eastshore being a director of Dubro, Aliator and Amicalle. At that point I started to understand the way thousands of firms can hide in Panama behind figureheads/shell companies. 


The dead-end of my investigation was two names, Marta Edghill and Katia Solano, who are policyholders of both Cheswick and Eastshore. If you parse the OpenCorporates website, you will learn that Katia Solano is involved (as director, secretary, etc.) of 14,453 (!!!) different companies incorporated in Panama, while Marta Edghill is involved in more than 8,900 companies. Thats how tax havens work – I assume that managing those thousands of firms involves quite a lot of work (amusingly, when I was watching a TV broadcast two days ago about the Panama Papers leak, the name of one of the Amicalle directors showed up on the screen). When I discovered the world of Mossack-Fonseca, I thought that if a relatively small firm like Latent Networks can be incorporated in Malta with a main shareholder in Panama, imagine the super montages big firms/banks can set up between the different tax havens in the world. Of course, all the firms linked to Amicalle Corp. (including Amicalle) have the same agent, named “BUFETE MF & CO”, and MF stands for Mossack-Fonseca.

Given the montage, in November 2014 I have not been able to find the real names behind Latent/Amicalle; I only found out that there were connections with people from Warsaw, Poland (later I discovered that the United-Kingdom radio regulator website, Ofcom, gives more details about the firms licensing frequencies, and that’s how I found some real names – but not the one I was searching for). After I released HFT in my backyard S01E04, I received a letter from Latent Networks, or more precisely, a right of reply. It must be said that my words about Latent were not really, let’s say, sweet – but this is another story, unrelated with Mossack-Fonseca –, and I thought it was fair to comply with the request and I published the Latent Networks response.

The answer starts: “The Latent Networks team had read the Sniper in Mahwah blog with interest for many weeks. The curious and somewhat eccentric activity of the author provided an interesting view, sometimes more sometimes less accurate, of the market, technology and work that we were deeply involved in.” Latent stated that “from cursory browsing Malta is behind Luxemburg, Cyprus, Holland and Ireland as a “tax heaven in European Union.” (I don’t know if the word heaven instead of haven was ironic) “It is on about the same level as Belgium, Sniper’s home country”. That’s absolutely right, Belgium is a tax haven for some people, mostly the rich French people working in finance, for the TV industry, etc., but I swear that as a French I didn’t come to Belgium to evade taxes. The Latent response confirmed that “the company structure is simple: in Amicale Inc. are the shareholders, physical persons. Latent Network Ltd. is the principal company… Keeping things sandboxed reduces risk to the customer and us. It’s just good housekeeping, not James Bond ”. Fair enough, but in my post I talked about the montages as a “novel à la John Le Carré”.

Unfortunately, if, as Latent stated, “Malta is small, administrative things get done quickly, English is the official language and it has Common Law similar to UK or US which makes international contracts easy; it is a better place than many to start a company that intends to build microwave networks in various European countries”, we sill don’t know why the parent company of Latent is incorporated in Panama. I’m not paranoid at all, but there must be a precise reason why one of the microwave providers operating in Europe needed Mossack-Fonseca at some point (since the “physical persons” Latent talk about are only figureheads, as shown in the diagram below) . The International Consortium of Investigative Journalists (ICIJ) announed that “in early May ICIJ will release the names of the more than 214,000 offshore entities incorporated by Mossack Fonseca and the people connected to them (as beneficiaries, shareholders or directors).” Perhaps Amicalle Corp. will be one of those offshore entities? Perhaps we’ll get more details? Also, it’s important to note that incorporating a firm in Panama, with the help of Mossack-Fonseca, is not illegal per se. When the Panama Papers leak was released, I recall that a month ago I was contacted by a journalist from Malta who was trying to figure out the Malta-Panama connection of Latent Networks (“I was researching two Panama cos and I found your blog; looks like your business tree for Latent could be connected to them”); the request was probably related to the Panama Papers affair. 

On the contrary, other microwave operators are far more transparent. For instance, New Line Networks (aka NLN, the joint-venture between KCG’s subsidiary Geodesic Networks and Jump Trading’s subsidiary World Class Wireless) was incorporated in Belgium on January 6, 2016, according to this public document. The head office address is in Slough, UK (this is the World Class Wireless address in the UK, while the registered office address of New Line Networks LLC in the UK is in Delaware – another kind of tax haven). Why NLN was incorporated in Belgium? This might be explained by the fact NLN is trying to implant in Oostduinkerke (cf. HFT in the Banana Land, Part III). But it’s most likely that NLN did it in order to get back the licences Global Colocation Service (another subsidiary of KCG) owned in Belgium, according to this public document. For once, in a country (my backyard) where there is absolutely no public data on the radio operators, this document is gold as it reveals for the first time the towers where Jump, KCG and now New Line Networks have dishes in my backyard (hourra!)  :


Since the KCG subsidiary Global Colocations is working with New Line Networks, it makes quite a lot of sense that the Global Colocation licences (in Belgium) were transferred to NLN; in the UK, according to Ofcom, the Global Colocation Services UK licences were transferred to New Line Networks LLC on May 5, 2015. But there is some irony here: guess who designed and owned the Global Colocation Services paths in Belgium before they have been sold to KCG? No idea? Latent Networks! (In the UK, the Latent licences/paths were sold to KCG in Septembre 2014, according to Ofcom) This is a so small world. Now I’m wondering why Latent is trying to arrange with Vigilant both in Richborough and Oostduinkerke, as Vigilant is a fierce competitor of New Line Networks there. But this is another story – a story for HFT in the Banana Land, Part IV.