Once Upon a Time in the West

don‘t really have time to write more posts on this blog now (I have more interesting research to do) but here are some words about “Go West”. Three weeks ago Bloomberg released this story, Traders Discuss Data Superhighway From Chicago to Japan, detailing a “project dubbed ‘Go West’ [that] would install a line of microwave towers from the Chicago area to the U.S. west coast, possibly ending near Seattle. Rival high-frequency trading firms are in talks to jointly build a Chicago-to-Japan communications link that would accelerate trading across the Pacific Ocean”. That’s interesting, and probably the first time several “HFT” firms (Virtu, Citadel and Jump are mentioned) join to build a verrrrry long microwave network somewhere (2,800 kilometers). The timing is interesting as in the UK two HFT firms, Vigilant and New Line Networks (aka Jump + KCG), are fighting to build a 300-meter tower in Richborough to save 4-5 microseconds between Frankfurt (the Deutsche Boerse FR4 data center) and Slough (the LD4 data center). In the UK the two firms compete for towers but in the US various companies join friendly.

Beyond the crucial New Jersey-Chicago microwaves routes I don’t exactly know what is going on in the United States of America (this is too far from my backyard), but I wanted to check out this “Go West”. Since I’m not that familiar with these very long-haul routes, I needed to start somewhere, so I asked help and received a feasibility study made in 2012 by a firm I can’t name, and the study was considering a Chicago to Seattle transcontinental route (what a coincidence ;) in a broader context (the great circle distances between the different world’s exchanges).


The study said that a microwave link between Chicago and Seattle would cut up 28 milliseconds off of current-best round-trip latencies between Asian market centers and the major trading centers in North America. The famous Hibernia cable was not operating in 2012 but the paper stated that a 10 ms Seattle to Chicago microwave link would allow Tokyo to London communication that is ± equal to the planned Tokyo to London undersea cables. Here are some latencies (remember, it was in 2012):


I was searching where I could find some possible “Go West” paths but the global map (included in the study) of the possible microwave routes between Chicago and Seattle is not that clear:


Luckily, there is this detailed map of the Idaho-Montana border:


So I checked the Federal Communications Commission (FCC) website and started to search for licences in this corner of the US – just to see if this “Go West” route was in progress. And I found some licences hold by a firm named “RSN Wireless”: 


And others, on the other side of the route, near Aurora (where the CME data center is living):


Then I put all the RSN Wireless licences…


… on a map (click to enlarge):


Well, that looks like (a partial) “Go West” route between Aurora and Seattle. The last path is going to the Harbour Pointe Cable Landing Station (where the terminal station for the PC-1 cable linking the USA to Japan is):


The route is partial but that’s interesting to note the first licences/paths RSN Wireless asked the FCC is for the Idaho-Montana border, around Tiger Peak and Pat’s Knob. Interesting because the feasibility study of 2012 stated that this area is a critical checkpoint. As you can see on the picture below, the route walks away from the straight line between Chicago and Seattle:


“Locking down these towers may impart a substantial first-mover advantage” said the 2012 study. That seems true as these licences/paths were granted to RWS Wireless in December 2014 (the last ones: August 2016). 

Now, is this really the “Go West” route involving different HFT firms Bloomberg talked about? On the FCC website the RSN Wireless address is “233 S. Wacker Dr., Suite 4300. Chicago” so I googled “233 S. Wacker Dr., Suite 4300. Chicago” and…


This is the IMC address! Well. IMC is not mentioned by Bloomberg, so we have two possibilities: 1/ IMC secured this Chicago-Seatle route, so the “Go West” consortium will have to compete with IMC; or 2/ IMC is part of the “Go West” consortium and they are building the route for all the different HFT firms. Now, remember that we just learnt IMC took stakes in McKay Brothers, one of the microwave provider leaders. May we assume that McKay is working for IMC (and the others) on “Go West”? I don’t know, and I didn’t ask. But one question remains: where is Gran Turismo?

Happy week-end.

The brothers get a taste of Gouda

Rumors have been circulating for a while. In five minutes, at 14:00:00:00:000 exactly, these rumors will be confirmed by an official press release: McKay Brothers, the well know international low-latency provider for high-frequency trading firms, receives investment from Dutch market-making firm International Marketmakers Combination, aka IMC. One of the McKay’s mottos, “Not affiliated with any trading firm or exchange”, will have to be removed.

The press releases will state:

Under the terms of the agreement IMC will take a minority stake in McKay, providing capital for the further improvement of McKay’s networks serving the latency sensitive trading community. Financial terms of the agreement were not disclosed.

Key elements are:

• IMC makes a capital investment and acquires an equity stake
• McKay maintains its independence under co-founders Stéphane Tyč and Bob Meade
• McKay commits further investment to reduce latency to the physical limit in its key long haul routes
• McKay continues to operate under its core business principles which include offering a level playing field and equal access to the lowest latency service for subscribers

The terms of the agreement are not disclosed and no details are provided but it seems that IMC purchased less than 30% of both McKay Brothers and their parent company Quincy Data. “That’s great news for all of the trading firms that use our networks and for the industry as a whole”, says McKay CEO Stéphane Tyč, while the Global Head of Technology at IMC, Arno de Quaasteniet, states that “as a strong, independent supplier, McKay plays a crucial role in ensuring equal and fair market access to liquidity providers. These are principles IMC shares”.

This is an interesting move. First, we may assume that IMC has been (and still is) a client of McKay Brothers. As far as I know  IMC is the only Amsterdam-based trading firm that did not build a proprietary microwave network (at least in Europe), unlike Optiver and Flow Traders, the two other Dutch HFT/market-making companies. Secondly, one may ask: why McKay Brothers needed investment from a HFT firm? And why IMC? It seems like various HFT firms offered to buy McKay Brothers but the company declined. On the other hand, we may assume that the firm needed investments to improve their networks (i.e. “reducing latency to the physical limit”). Even if it’s said that McKay has the fastest network between Chicago and New Jersey, speed race is an endless war. In June 2016, Stéphane Tyč explained in Chicago that route improvements are critical to save a few microseconds, as shown in the picture below – it took four years to achieve the “route improvement” in red:

Average latencies between Chicago (CME) and New Jersey (Secaucus and Mahwah)

I don’t know how much McKay paid for the tower they acquired to save 17 microseconds between Chicago and Mahwah (the “route improvement”). That’s probably less than the €5,000,000 Jump Trading spent to purchase a tower in Houtem (Belgium), and less than what Vigilant and/or New Line Networks will spend in Richborough (if they can build these controversial very high towers). But everything is expensive and the cash flow of IMC will probably help McKay/Quincy. According to Amterdamtrader, the net profit of IMC was €185 million in 2015 (€20 million more than 2014). With all that money McKay will have the resources to acquire other towers – if needed. (If McKay builds a London-Stockholm route that would be amazing to have dishes put on old windmills.)


© Amsterdamtrader

Now I bet McKay will have to tell the customers of their networks that they will never give IMC a speed advantage. “IMC will have no access to client information and no latency advantage”, Stéphane says. 

So, one of the biggest market makers in the world (active in over 100 exchanges and employing 600 people) has stakes in one of the best low-latency networks provider in the world. It seems that the (young) HFT microwave industry is changing these days. For years you had private networks (built by proprietary firms like Vigilant/DRW, Jump, etc.) on one hand, and networks providers (McKay, Custom Connect, Perseus, etc.) on the other hands. In 2015, trading firms Jump Trading and KCG created a joint venture, New Line Networks, to “sell network bandwidth to industry participants and third party vendors”, meaning that they now compete with McKay and the other providers. Earlier this week Bloomberg reported that at least three rival trading firms (Citadel, Jump and Virtu) “are in talks to jointly build a Chicago-to-Japan communications link”, including a microwave route between Chicago and the U.S. west coast – a project dubbed “Go West”. Competition in the very low-latency area is no longer a war between proprietary trading firms and networks providers – it’s a little bit more complex now. Anyway, good luck to the brothers. Accidentally I’ll be in Amsterdam tomorrow; I’ll meet several people involved in the HFT industry and I guess what we are going to talk. 


The Harvard University Campus from which the McKay, Quincy and Jefferson names come. Jefferson Microwave LLC was the first network McKay International built in the US in 2012.

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.

Capture d’écran 2016-07-26 à 10.35.32

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:

Capture d’écran 2016-07-26 à 16.52.18

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.