Shortwave Trading | Part III | Fourth Chicago Site, East Coast, Patent, Regulation, and Farmer Kevin Mystery


[Here is Part III of Bob Van Valzah’s series “Shortwave trading”. No real comments from me on this one as I’m on vacation. I’ll cover the HF sites in Europe once Bob’s gardening leave ends. Happy reading, and thanks Bob for this new episode. Alexandre.]

I’ve heard that years ago, there was a stable business selling microwave data radios to local governments for networking their offices. Then the traders discovered microwave and everything changed for the radio vendors. Their new customers weren’t so much concerned about the cost—they just wanted the lowest-possible latency in the radios and repeaters.

I’m picking up signs that vendors in other industry segments are now seeing a surge in their business with the recent interest in shortwave trading. For example, TCI has had a good business making shortwave antennas for 50 years. Then they issued a press release in April 2018 saying they’re now working with “non-government customers to provide HF antenna communication systems that minimize timing-latency.”

Bloomberg has picked up the story of shortwave trading, digging through public records to disclose ownership of a site I described in a previous post. It seems like this is a hot topic!

In this post, I’ll show some recent site changes, document a fourth CME/Europe shortwave trading site I’ve discovered, detail discoveries from my trip up the east coast, discuss regulatory questions, cover two patents on shortwave trading, some miscellaneous things, and finally explain the connection between a sax-playing sheep farmer and shortwave trading. This is a long post and these are varied topics, so please just skip to the next section if you’re not engaged.

A Rapidly Changing Field

After stumbling on the original West Chicago Shortwave Trading site, I found other sites by looking in an FCC database of experimental licenses. More on these licenses below, but as you can guess from the name, holders of such licenses can be expected to be doing some experimenting. I’m sure there are many technical and business experiments happening that we can’t see, but antenna changes are hard to hide. Consider what’s happened at the West Chicago tower site in the four months since I discovered it.


Evolution of antennas on the West Chicago tower over four months.

I never set out to document the changes over time, so my camera angles above aren’t identical, but I’ve still tried to make a fair juxtaposition with cropping and zooming. The changes have replaced fairly broadband shortwave antennas with more narrow band antennas and strengthened the mounting system holding the antennas to the tower. The boom length on the new antennas is nearly double that of the previous antennas, giving them more gain. It looks to me like they’ve decided on a narrower band of frequencies and want more oomph, which can be turned into better reliability or more throughput. Shortwave trading appears to be a rapidly changing field.

I have a hunch that the trading companies are not entering the field without tapping the experience of others. While visiting the West Chicago site in April, I noticed a building permit posted on the perimeter fence.


Building permit on fence around West Chicago tower site.

The contractor doing the work is listed as “Long Wave,” which could be Long Wave Strategic Communications. They appear to be experienced in building shortwave sites for global governments. They had no comment when I asked if they knew anything about a tower in West Chicago.

A Fourth Chicago/Europe Antenna Site

The FCC experimental license database shows a new license granted on June 6 for a site in Maple Park, Illinois, less than 16 miles from CME’s data center in Aurora. Google Earth showed several buildings surrounded by corn fields on all sides. I could see fuzzy shapes that could be a shortwave antenna on a tower attached to an old farm silo, so I was intrigued.


Intriguing aerial image from a site with an FCC experimental shortwave license.

I Googled the address and learned that this site was the home of TowerWorks, Inc. who are “Communication Tower Specialists.” Now looking back at the image above, I could understand the gray and black area above the silo. At first I though it was shadows on cylindrical bails of hay covered with tarps. But in the context of a tower company, I can guess those are monopole tower sections. Use a crane to stack two or three of those atop each other and you have a great place to put an antenna!

A bit more Googling turned up an interesting filing with the local zoning board from June 17, 2017. The handwritten application seeks special use of the land to store tower sections, add a tower for a customer, and “man toys.”

I visited the site and found the pattern I’ve come to expect. A couple of massive shortwave antennas pointed at Europe and a microwave dish pointed at CME. As with West Chicago, I think I see a narrowband, high-gain antenna, as well as a more broadband, lower-gain antenna.


The fourth site I’ve found linking CME to Europe.

There was a time in the past when all trading between Chicago and New York was done over fiber. But in modern times, competitive trading companies seem to use their own microwave networks or those of McKay Brothers. Seeing this transition has made me wonder what the future holds for shortwave trading. Will it be a crazy experiment by only the top-few trading firms, or will it become effectively “table stakes” for any serious participant in ocean-crossing trades? Having found a fourth CME/Europe site with ownership independent from the previous three, I’m thinking it’s the latter.

One significant difference with shortwave is that there’s not enough bandwidth to share at a single site. Since a single microwave link can offer hundreds of megabits of bandwidth, McKay can offer a “private bandwidth” service where fractions of the total link bandwidth are for sale. Even if that business model is unlikely to work for shortwave, the market data distribution model of Quincy Data (a McKay subsidiary) might work. More on this below.

East Coast Reconnaissance and Speaking Trip

A single FCC experimental license can cover transmitting from several locations. So my initial searches for shortwave licenses within 100 miles of CME’s Aurora data center also turned up transmit locations along the east coast and even in Alaska. I used Google Street View to look around the licensed area in Alaska, but didn’t find any antennas there.

Still, there were many antenna sites along the east coast and I had agreed to speak on shortwave trading at the STAC Summit in New York. I’ve always wanted to see the museums in Washington DC, so my gardening leave seemed like a natural time to rent a car and visit antenna sites on the east coast. I can’t imagine how many wrong turns I would’ve made in eight hours of driving through unfamiliar territory without GPS directions.


Planning a trip to visit east coast sites with experimental licenses.

In the same way that Chicagoans and New Yorkers each have their preferred style of pizza, I’m beginning to think they also have their preferred style of shortwave trading. I didn’t really expect to find anything active at the Baltimore and Washington DC sites since their licenses had expired long ago. However, one of those expired licenses from 2011 covers a Chicago-area antenna that’s still flying so I thought it was worth looking for the other end of the link, but couldn’t find it.

One generality that emerged from the trip is “build out Chicago first.” Several of the licenses covering sites I found operating in Chicago also allowed for east coast transmit sites, but I didn’t find any one company operating in both Chicago and on the east coast, even when they had licenses to do so.

A signal arriving from across an ocean is several billion times weaker than one arriving from across town, so electrical noise is a big consideration in deciding where to place a receiving antenna. People like to surround themselves with electrically noisy machines (e.g. cars, computers, shavers, etc.), so I wasn’t too surprised to find no antennas near densely populated areas like Secaucus, New Jersey.


A well-camouflaged cell tower.

I had a lot more hope for an antenna site in more sparsely populated Wesley Hills, New York which is just across the state line from Mahwah, New Jersey. I didn’t find anything there except a well-camouflaged cell tower in the middle of the woods, but this site is on the same license as the West Chicago tower, so I felt I had to visit.

Alpine, New Jersey Antenna Site

All the sites visited so far have been on FCC experimental licenses, but I received a tip about an east coast shortwave broadcast license that could be related to trading. The heyday of shortwave broadcasting is sadly long past, but this new station was approved for construction in August 2017.

Unlike shortwave stations from the days of yore, this license uses a new form of digital transmission called Digital Radio Mondiale (roughly translated as worldwide digital radio). The format supports a variety of different voice/music digital encoding schemes, allowing for tradeoffs in the radio bandwidth used, the reproduction quality, and the reach of the signal. But most relevant to traders is the fact that data and voice can be sent at the same time (“data casting”). Think of how modern car radios seem to know the song and the artist for every song played.

The application for this license says the applicant’s principal business is “broadcast and data services,” which would be a good description for a shortwave version of the Quincy Data business model mentioned above.

A little looking through LinkedIn shows that the applicant shares an address on Lexington Ave. with a company involved with securities. A director of the company is listed as being an Independent ForEx Trader. The application says the antenna will have a heading of 52º and achieve good coverage of Europe.

The antenna site is in Alpine, New Jersey. There’s a nice aerial photo of the site in the application:


Aerial photo from application to build a shortwave broadcast station in Alpine, NJ.

Even though the licensed antennas would be on the smaller “radar tower” highlighted in the application photo, it’s worth noting the much larger red and white tower to the left. It’s often called Armstrong Tower after the FM radio pioneer Edwin Armstrong who built it in 1938. His work gave us the FM broadcasting standards still in use worldwide today.

But back to the application for a shortwave antenna on the radar tower. I managed to get this photo of the radar tower before the Alpine Police chased me away:


The Alpine, NJ radar tower–with no shortwave antenna to be seen.

After checking my rental car and out-of-state driver’s license, the officer accepted the story that I was looking for the Armstrong Museum. It was on the same site, but apparently closed years ago. The officer politely explained that they’re rather vigilant around the site because it was used as the backup transmission site for the NY/NJ metro area after the World Trade Center antennas and transmitters were lost in the 9/11 attacks. It’s across the Hudson and only 6 miles away from the northern end of Manhattan.

But getting back to shortwave trading, the key point here is that no shortwave antennas had been built as planned when I visited in early June, 2018, even though the FCC had allowed construction to start 10 months prior.

Riverhead, New York Antenna Site

There’s an experimental shortwave license for a site way out on Long Island at Riverhead, NY that looked very promising. Before heading to an antenna site with my own cameras, I always see what I can from aerial imagery first.

Riverhead Size Reference

The antenna site at Riverhead, NY is surrounded by dense forest.

The above image covers an area about 1/2-mile on each side. The largest antenna sites I’ve previously surveyed have covered a few acres. The drone pilot I hired to survey the site measured it at 26 acres. It’s huge. Here’s the drone’s-eye view.


The drone’s-eye view of the antenna site at Riverhead, NY.

Most of the antennas used here are made with comparatively thin wire strung between steel towers, rather than with rigid aluminum tubing that’s easier to see from the sky. So it mostly looks like somebody cut a huge hole in the woods so they could stand up about 20 red and white towers until you take a closer look.

Riverhead Small LP

A log-periodic wire antenna suspended between three towers.

Above is one of the smaller wire antennas at Riverhead and the zoom lens makes the size hard to judge. The two closest towers are about 90 feet apart, while the one behind the trees with the red “T” bar at the top is 125 feet back from them. The diagonal lines in the foreground are guy wires for towers outside the frame.

In previous surveys, I’d never come across a pyramid antenna like this before.

Riverhead Pyramid

An omnidirectional, pyramidal, log-periodic antenna.

It has a central tower and four sides, each of which is logarithmically flared toward the base. This site is practically an antenna zoo. It seems to have one of everything.

Research into the history and ownership of the site suggests that it wasn’t recently built for shortwave trading like the other sites I’ve documented. Historical imagery shows most of the towers have been there since at least 1994.

The site was built by ARINC many decades ago. You have to use the Internet Archive’s Wayback Machine to even find their history. Briefly, they were appointed by the FCC to provide communication to aircraft while they’re flying outside the range of their usual VHF radios. This is called “over-the-horizon” communication because it’s required beyond the line-of-sight limits of VHF. If you’ve ever flown back from Europe and wondered how the pilot knew the weather at JFK, now you know. Actually, today’s transoceanic pilots also have access to satellite communication, but I’ve read that their bosses still like them to use shortwave because it costs less.

In 2013, ARINC was bought by Rockwell Collins, who have a line of business making shortwave radios for airplane cockpits. They in turn agreed to be acquired by United Technologies. The FCC experimental license database shows that Rockwell Collins also has a license at this site, which I presume is for testing products like their shortwave modem.

Radio Central

Radio Central at Rocky Point, NY. The worlds largest radio transmitter at the time.

If you dig back into the history of the area, you find that radio figures prominently. During the 1920’s, RCA built Radio Central, the largest radio transmitter in the world, just 17 miles away at Rocky Point, NY. Riverhead was the complimentary receiving site. The leader of this radio work was David Sarnoff who oversaw RCA and NBC. He also worked with Edwin Armstrong mentioned above in the history of the Alpine, NJ tower. In 1978, RCA sold 2,000 acres of land at Riverhead and 5,000 acres at Rocky Point to the state for $1. The Riverhead land is now the David A. Sarnoff Pine Barrens Preserve, coming right up to the fence around the antenna site I surveyed.

Getting back to modern-day Riverhead, I used the drone imagery to work out the outlines of the shortwave antennas there.

Riverhead Outlines

Outlines of shortwave antennas. Red have been in place decades. Bluish appear in 2016.

Unsurprisingly, the red antenna outlines point along the common flight paths over oceans. Google Earth has a sort of Wayback Machine for aerial images so you can see changes over time. Not much changes from 1994 until May 2016, when the antennas I highlighted with bluish outlines first show up. One of the bluish squares is the pyramidal log-periodic antenna shown above. The smaller bluish shape is a very interesting rigid log-periodic antenna similar to those seen at other shortwave trading sites.

Riverhead LP Beam

A directional, log-periodic antenna, made from a truss and rigid aluminum tubing.

We know these new antennas are transmitting because their license gives the station call sign as WI2XER and their signal was received by a shortwave listener. Experimental stations often request an exemption from the usual requirement that stations identify themselves with their callsign regularly. WI2XER did not request the exemption, so they regularly pause their high-tech data transmission experiments and identify with old-fashioned Morse Code.

WI2XER as received by a shortwave listener.

Careful observers will note the microwave dish on the tower. I couldn’t find FCC records for it, but by eye, I can tell you that it’s pointing in the direction of Secaucus. To be fair, that’s also the direction of LaGuardia Airport and Central Park, so I have no certainty in the microwave destination.

Riverhead Cabin

Riverhead, NY receiving cabin as seen in The Book of Radio, Charles William Taussig, 1922.

So there’s a century-long history of shortwave radio around Riverhead. Antennas there have communicated with aircraft in recent decades. Only the last two years show any signs of new activity that seems to match the pattern seen in use by shortwave traders elsewhere. But if traders are now working there, it’s not the first time. A book on radio published in 1922 describes a small cottage in the woods at Riverhead where one “would never suspect that one fifth of the trade of the United States with Europe is practically conducted.” Nearly a century ago, prices sent by Morse code from Europe were received at Riverhead and then sent over land lines to 64 Broad St. in Manhattan, driving international trade.

Regulatory Questions

Many have asked how shortwave trading stations would be regulated by the FCC. I’m no expert in this area, so I sought the perspective of Bennett Z. Kobb before I left Washington DC. He’s a veteran watcher of the wireless industry and curator of @experimradio, an excellent Twitter feed highlighting interesting FCC experimental licenses. I’ve boiled my understanding of our conversation down to a few paragraphs for others who want some regulatory insight into shortwave trading.

If your business wants to set up a microwave link between two offices, the FCC has a category of licenses just for you. If you want to be an AM, FM, or TV broadcaster, there’s obviously a category of licenses for that. There are even licenses for shortwave broadcasting to the general public. But what if your business wants to set up a private shortwave link between international offices? Sorry, there’s no permanent license category for that. Nobody ever wanted such a license until recently.

FCC experimental licenses seem to be the category of choice today. These allow experimental operation for a few years and may be renewed. Historically, experimental licenses shared some constraints of amateur licenses, specifically the old rules contained prohibition of commercial use and encryption. However, the rationale behind new rules issued in 2013 says they were “modernized,” specifically to “keep pace with the speed of modern technological change.”

The rationale for rule change also mentions that it’s often proprietary business interests that drive technological change. Hence an applicant can ask the FCC not to publicly disclose proprietary parts of their application. (Example redacted application.) The proprietary information could describe novel technologies, questions to be answered by the experiment, and future business plans. But even if the FCC agrees not to disclose proprietary information from the application, the granted license will still reveal the transmitter location, frequencies used, other basic technical data, and contact information.

It’s clear to any FCC observer that rules do change over time. My best guess is that shortwave traders running unsuccessful experiments will just let their licenses expire. But those achieving success will renew, while petitioning the FCC for a rule change that would create a new license category allowing permanent operation. But note that the ocean-crossing properties of shortwave also make it subject to regulation by more than just the FCC. Clearly, there are mechanisms for this, but the international wrinkle will probably delay such permanent rule changes compared to domestic-only changes.

From my own perspective, I’ve now observed at least four different companies placing large bets on the future success of shortwave trading. They’re not skirting regulations and hoping that the regulators don’t notice. They’ve requested, and received, FCC licenses for their operation. Even though they’re limited-term licenses today, I can infer from the size of the bets that the traders see a path to continued legal operation.

Shortwave Trading Patents

Interesting things started to happen after I began talking about shortwave trading in public. I’ve received tips that often begin “Hey Bob, have you seen this?”

One tipster mentioned a US patent for trading over long distances with low latency using shortwave. It contains key ideas like using Software Defined Radio (SDR) to give computers control over radio parameters. It was published in June 2016, with a priority date of December 12, 2014.Patent Figure 2

Another tip I received pointed to a US patent covering shortwave trading with multiple paths. It was granted in September 2015, with a priority date of December 11, 2014. That’s literally the day before the priority date on the above-mentioned patent. The patent links to three prior posts on this blog [the now famous “HFT in my backyard” series – Alexandre] as non-patent citations. [Seems the people behind this patent is/are a Twitter follower of SniperInMahwah – Alexandre.] Patent Figure 1

I’m no IP attorney, but I read the patent as describing a communication system with multiple paths that may differ in bandwidth and latency. It describes “command data” such as an order to buy or sell and also “triggering data” that causes the command to run, perhaps with simple parameters that can be delivered with the trigger.

It gives the example of a trading system using both fiber and shortwave communication. The code and the orders can be sent over the fiber, with shortwave carrying only the trigger of when to sell, perhaps with small parameters.

Shortwave Radiogram

CME Leroy Neiman

An expressionist painting of the Chicago Mercantile Exchange trading floor pits by LeRoy Neiman, fittingly recently used as a test image by Shortwave Radiogram.

Shortwave broadcasting has been common since the 1920’s, but modern alternatives like the Internet have caused some to call it a legacy technology who’s glory days are behind it. Name calling doesn’t stop innovators like Dr. Kim Andrew Elliott from inventing things like Shortwave Radiogram. It’s a radio program of digital text and images sent by powerful shortwave stations on weekends when they’re not busy with their usual voice transmissions. Reception reports come in from all over the world.

This is relevant to shortwave trading because it’s an existence proof for sending data via shortwave. Take a quick look at YouTube reception reports from Israel, Germany, or Ontario to get a feel for the speeds and sounds of data and images going over shortwave.

Radiogram Screenshot

Screen capture from YouTube video showing Shortwave Radiogram being received in Israel.

The program for June 22-25 carried the text of a story on shortwave trading written by the ARRL, the national association for amateur radio. Watching the text scroll by as it’s received in the reception report videos linked above will give you a feel for shortwave data rates. Digital transmitters can probably achieve better data rates than shown, but this is probably the right order of magnitude for your thinking.

Farmer Kevin Mystery

I know I shouldn’t be impressed by how deeply connected the world is these days, but who could expect the connection between tweets from a sax-playing sheep farmer and shortwave trading? Let me explain.

Farmer Kevin Harrison plays tenor sax and tends his sheep in fields in Bath, England. He tweets as @FarmerKev100 and on June 17, 2018, he posted a picture of a mysterious device that showed up in one of his fields, asking what it was.

Farmer Mystery Object

A mysterious device with a solar panel appeared in Farmer Kevin’s field.

It was chained to a tree in his field so he went to get a hacksaw to cut the chain. By the time he got back, “two dudes were taking it away.

Farmer Dudes

“Two dudes” taking away the mysterious device.

Reddit has a subreddit called “WhatIsThisThing” with 600,000 subscribers where people post photos and videos of unknown things, asking for help in identifying them. Farmer Kevin now has about 600 twitter followers. Somehow Reddit user Pontifff saw Kevin’s photo and asked the subreddit for help with identification the same day Kevin posted the picture. Farmer Kevin was astonished four days later that his tweet was seen over 71,000 times.

The mysterious device was covered in camouflage tape and had a solar panel. Many on Reddit liked the suggestion that it looked like a “solar-powered beer fridge for hunters.” There were also some pretty hilarious comments on the Twitter thread linked above.

The only reason I know about these events is because I happened to be looking at the sources of traffic to my previous blog posts about shortwave trading when I saw 3,000 clicks coming in from the subreddit. I found that Reddit users linotype and spiregrain had commented on the mysterious device and suggested that it might be connected to shortwave trading, linking to my previous posts.

Their suspicions were raised because the device had wires going up into the trees that appeared to be ad hoc antennas.

Now imagine that you’re an aspiring shortwave trader. Some antenna sites are better than others, so how do you decide among them? Your goal is to receive a faint signal coming from across an ocean, so you want to choose a receiving location away from noise sources. You might build a portable broadband shortwave receiver device that logged noise readings to an SD Card for later analysis. Adding a solar panel would remove the need to change batteries. You might take your device to each proposed receiving site, chain it down, hope nobody notices, and collect a few weeks of data on the local noise levels so that you had data for comparing the receive sites.

Now throw in the fact that this site in Bath is on the side of a hill gently sloping toward the US and I like the explanation that somebody was assessing the site for use as a shortwave trading receive station. Reddit and Twitter came to the most reasonable conclusion in my book within a day and had great fun along the way.

Next Up

I hope to complete one more post here before my gardening leave ends and I go back to work on July 17th. I know there are still many discoveries to be made and insights to be gained, but my forthcoming employment agreement won’t allow me to talk about them publicly.

I plan to list some of the tools and techniques I’ve used in my investigations. I’ll also give pointers to some potentially interesting sites and hope that others can continue the investigation.

Meanwhile, the owner of this blog is working on the nature of exchanges (with the help of local French wines).


[I pleased to share Part II of “Shortwave Trading” by Bob Van Valzah. Part I had more than 25,000 views, which is quite insane. Thank you for all the comments we got. Comments in brackets [] and in italics signed SIM (as for SniperInMahwah] are mine – Alexandre. Happy reading]

I have previously claimed that trading over shortwave radio is real and presented the story of the first evidence I found of it. It was pleasantly surprising to see the story picked up by IEEE Spectrum, Hacker News, Hackaday, and others. But since I hadn’t anticipated such a diverse audience, I didn’t provide details needed to understand shortwave trading in context so a lot of questions were raised. I’ll provide some background here, answer the questions, and also document two other shortwave trading sites I’ve found around Chicago. Traders can skip ahead while I fill in the broader audience.

Why is there a latency race? Isn’t it just a waste of money?

Electronic trading technologist just take the latency race for granted, but it’s important to think about why it exists and what it means to the average person. When you want to fill your car with gasoline, you have the choice of going to the nearby gas station and accepting their price or perhaps comparing prices at stations a little farther away. We would all spend a lot more time comparison shopping if we didn’t have pretty good confidence that the prices at our local stations were competitive. But what keeps those prices competitive?

The analogy between your local gas station and electronic markets is admittedly imperfect, but I think it is helpful in understanding why latency matters and how you benefit. Nobody can buy a tanker of gasoline in New York and immediately sell it in Chicago. The laws of physics prevent us from economically moving such a heavy load over a long distance quickly. But a share of Apple stock weighs nothing. The Chicago price and the New York price can be compared and changed in an instant. Well, about 4 milliseconds is how long it takes for an updated price to make the trip. Prices can make about 250 one-way trips in a single second.

So when buying or selling Apple shares, you don’t have to shop around for the best price. Electronic trading companies have an incentive to build the fastest networks linking financial centers so that prices can move quickly between them. Buyers and sellers benefit because their local market has electronic traders who know the best prices on other markets and will be happy to do a local deal at the best global price (it’s market making). It doesn’t take a rocket surgeon to see the business opportunity in this type of trading, so high-speed traders have to be efficient because they’re competing against each other. The latency race has to happen for each market to have the best price. Competition between electronic traders limits their spend to the benefits that come with better pricing.

Why does radio help win the latency race?

Traders use radio because it can move prices faster than optical fiber.


This straight pen appears to bend when it goes below the surface of the water.

I won’t bore you with the physics, but I will remind you of this elementary school experiment where a pencil appears to bend in a glass of water. This happens because light moves more quickly through air than it does through water. In the same way, radio waves move more quickly through air than light can move through an optical fiber. In trading parlance, radio is lower latency than fiber over a given distance.

But radio is also faster because it almost always covers a shorter distance. Fiber paths tend to follow roads and property lines that may not go exactly in the desired direction. Radio towers may be inconvenient, but they give the advantage that the signal can take the shortest-possible path allowed by physics, not the kinky path dictated by rights of way [I explained that in the now famous “HFT in my backyard” – SIM].

The speed advantage of radio adds up as the distance increases. That 4 ms number I mentioned above is the microwave radio time of flight between Chicago and New York. (Well actually, it’s between the Chicago suburb of Aurora and the New York suburb of Secaucus that’s actually in New Jersey.) For comparison, the fastest fiber path on that route was 6.75 ms, for a radio advantage of 2.75 ms. On a Chicago to Europe shortwave path, the radio advantage is more like 10 ms.

The latency saved matters even over short distances. Bloomberg observed that a trading company had purchased land adjacent to CME, likely to replace a fiber path with a radio path. I measured and found a fiber path length of about 1,400 feet, versus a radio path length of about 1,000 feet. See aerial photo [I will detail what’s going on around the CME in Part IV, it’s quite amazing – SIM].


Replacing 1400 feet of fiber with 1000-foot radio path saves about 1 µs.

The 400 foot advantage may not sound like much, but that works out to about a 1 µs advantage when you take into account both the straighter, shorter path and the faster flight time. That’s only a millionth of a second and may not sound like much, but a zippy Xeon CPU can do about 3,000 instructions in that amount of time. So getting back to the point about efficiency above, traders without the land and hence the shorter radio path have to get the same number crunching done with 3,000 fewer instructions if they want to stay competitive [That’s what I will detail in Part IV – SIM]. Returning to the extreme case of shortwave vs. fiber between Chicago and Europe, a trader without shortwave is at a 30,000,000 instruction disadvantage.

What’s the difference between microwave radio and shortwave radio?

I’ve been rather cavalier here in comparing shortwave and microwave, even though they’re quite different. Comments on the previous post showed that there’s some confusion that I’ll try to clear up. Most articles on this blog are about microwaves which travel only in a straight line. The line cannot be obstructed by trees or buildings or pretty much anything else. A cup of water gets hot in a microwave oven because the water absorbs microwaves. Trees are mostly water, so they too absorb microwaves. Hence microwave antennas go on tall towers or mountains that clear the tree tops.

As the length of a microwave link gets longer, you need taller towers and larger antennas. You reach a point where it’s smarter to add a relay tower in the middle and make a two-link chain. Relays add some latency and cost, so designing multi-link microwave chains involves many compromises and tradeoffs. The exact number of links in the chain on the 840 mile path from Chicago to New York is a closely-guarded secret for each network, but it’s most likely more than 20, but less than 30.

Some of the microwave networks between Aurora and New Jersey. (From Laughlin, Aguirre & Grundfest paper “Information Transmission Between Financial Markets in Chicago and New York”, 2013)

The microwave links between Chicago and New York cross the southern tips of Lake Michigan and Lake Erie, but they can’t cross oceans because the distances are too vast. For that, you need shortwave or microwave/fiber hybrid networks like GoWest, covered previously on this blog.

How does shortwave stack up against microwave and fiber?

Fiber reliability is essentially perfect, but microwave links will have bad days, typically related to weather. Rain, snow, and ice in the path can absorb the transmitted signal before it gets to the receiver. Antennas can be 6 feet in diameter, so there’s a lot of force on them in a strong wind that can knock them off course. Still microwave reliability can be pretty good. Low-latency microwave pioneers McKay Brothers have a saying: “It’s better to be fast 99% of the time than slow 99.999% of the time.”

Shortwave, on the other hand, is much less reliable than microwave, for a variety of reasons. Electrical storms or man-made interference near the receiver can make so much noise that the faint signal from a remote transmitter cannot be heard. Shortwave depends on the vagaries of Earth’s ionosphere, a part of the upper atmosphere. Shortwave signals would typically only go a few hundred miles. But when ionospheric conditions are just right, some small fraction of the signal bounces or “skips” off the ionosphere and is reflected back to Earth, instead of just blasting off into outer space. So traders hoping to use shortwave for trading are at the mercy of many physical forces they can’t control. I couldn’t make any reasonable guess at a reliability percentage, but shortwave is far less reliable than microwave—probably a couple of orders of magnitude less reliable.

Even when the conditions are right for shortwave to work well, I wouldn’t expect bandwidth much better than a dial-up modem. Compare that to a few hundred megabits over microwave and 10’s of gigabits over fiber.

The low bandwidth with shortwave has a subtle consequence: the latency advantage over fiber can easily be consumed by the time taken (serialization latency) to send even a small message measured by fiber standards. The entire 10 ms latency advantage can be consumed by the time it takes to send a single 64-byte packet at dialup speeds. So shortwave traders need to have ways to very tightly encode their prices or other information in just a few bytes or bits—yet another pressure toward efficiency mentioned above.

Bringing all of the above together, we can make a table that compares fiber, microwave, and shortwave.


A comparison of fiber, microwave, and shortwave. Green backgrounds highlight relative advantages while red backgrounds highlight relative disadvantages.

The quick summary is that shortwave has the limitless reach of fiber and the lowest-possible latency of microwave, but it’s highly unreliable, expensive, and has the bandwidth of dialup.

When explaining the relative advantages of radio links and fiber, I often use the two gun analogy. Imagine that you are a trader with a message to send to a remote site. You have to write the message on a bullet to send it. You have a “fiber gun” in one hand and a “radio gun” in the other.

Every bullet from the fiber gun will reach the target, but some percentage of bullets from the radio gun will explode in midair and never get there. Bullets from the radio gun fly 1.5 times faster than bullets from the fiber gun. You can pull the trigger on the fiber gun as often as you like, but you have to wait, to reload, after firing the radio gun. The reload time can be milliseconds, opening the possibility of “shooter’s remorse.” You decide to take a shot with the radio gun, then quickly get new information that makes you want to shoot again before your gun has reloaded.

If traders send signals over radio, can others hear them?

The threat that has to be considered is a competing company that manages to get a receiving antenna closer to an exchange and figures out how to decode your signal. Not every trade is a winner-take-all opportunity, but no trader wants the cost of their transmitter to benefit competitors.

Encryption is the only answer I see. It’s fast since it only requires that each bit be XORed on transmit and receive with a secret bit pattern known only to the owner of the transmitter and intended receivers. Cryptographers have shown that XORing an information stream with a pseudo-random bit stream produces a new bit stream which is indistinguishable from noise. In other words, all traces of information are removed from the stream. So a receiver that doesn’t have the secret bit pattern can only receive noise.

Given the low data rate on shortwave, the secret bit pattern only needs to be a few MB long for a whole trading day. It only takes a fraction of a second to send this over a secure fiber link while the markets are closed. Better yet, just send a 256 bit seed to a cryptographic-quality pseudo-random number generator and you’re done.

Note that most Internet encryption protocols require lossless transport and so they won’t work on lossy shortwave. This is easily handled by advancing the encryption bit stream by GPS clock rather than by bits received.

What about satellite?

Geostationary satellites are out of the question for trading. Lots of bandwidth, but it takes 270 milliseconds to travel the distance to the satellite and back. Physics gets in the way.

Low earth orbit satellites are a possibility because they fly so much closer to the earth. I’m not aware of any constellations flying today that would be suitable for trading. Some on the drawing board might sometimes have a latency advantage over fiber under oceans. But none are an unconditional win over fiber because the path length changes as the constellation moves relative to the ground stations. See the talk by Stéphane Tyč of McKay Brothers for more info on the possible use of satellites for trading.

The ionosphere is closer to earth than the lowest of the low-earth orbit satellites, so shortwave will always have a shorter hypotenuse, and hence lower latency, than satellite. However, microwave signals just graze Earth’s surface so chained microwave links are lower latency than shortwave, over the mostly-land paths where they’re possible.

Are you spilling secrets?

No. The possibility of shortwave trading has been discussed on this blog and on Meanderful. I’ve just figured out how to find the FCC licenses in public records. The antennas are too big to hide. I’ve combined the above with maps, background info, and my analysis. It’s really no surprise, given that people want to have the best prices close to them so there will be a latency race. We should expect trading technology to shoot directly for the lowest latency allowable by the laws of physics. Put simply: Business + Physics = Shortwave.

When did this all start?

Some expired experimental licenses date back to late 2011. However, software defined radios have come a long way since then. The current round of license applications were sent in mid- to late-2015 [this is when I first heard about these projects– SIM]. The towers in Indiana, discussed above, were built between October 2016 and April 2017.

In March 2018, I photographed the cardboard box for the software defined radios used at the West Chicago tower. It was sitting in the garbage pile, on top of a pile of leaves that were not badly decomposed, so I assume it was installed after the fall of 2017. Further, the box was exposed to the elements of a Chicago winter and didn’t seem to be in bad shape at all. So I’m going to guess that it was actually installed more like February 2018. Fresh stuff.

What else have you found around Chicago?

I went to the FCC Experimental license database and found nine current hits for shortwave licenses within 100 miles of CME’s data center in Aurora. Two were bogus; one was the West Chicago site I stumbled onto. I visited four sites and found no shortwave antennas there. But that still leaves two interesting sites.

The first is near Wanatah, Indiana (41.457048°, -86.859156°). This site looks interesting from above.


Compare the size of the antenna to the farmhouse and the 18-wheeler.

You can see a large square area of the cornfield that looks different. There’s an access road leading to a light-colored part of the square. Note the sizes relative to the farmhouse and the 18-wheeler to see the scale.

That looked promising so I drove there and took this picture from the road at the bottom of the aerial shot above.


Wanatah antenna site as seen from nearest country road.

The FCC database says those two towers are 160 feet (49 meters) tall. They hold four monster log-periodic antennas according to another FCC database. I could see from the feed line that the antennas were configured to operate as a single large antenna. The license shows a 10 kW transmitter with an effective radiated power (ERP) of 768 kW due to the antenna gain. The database also confirms what you can see by eye in the aerial photo: the whole antenna site is pointed at a 50º angle, which solidly hits Europe with the 26º beam width of the antenna.

There’s a microwave dish on one of the towers. FCC licenses show the tower owner has a series of three microwave hops west to a site in Oak Forest, Illinois.


Office building in Oak Forest, Illinois where Wanatah tower owner’s microwave licenses stop.

This is a point of presence for a local wireless ISP UrbanCom.Net which also has an antenna on a tower adjacent to CME. My hunch is that the shortwave trader just buys bandwidth from UrbanCom for the rest of the path from Oak Forest to CME [When I parsed the FCC documents about the Wanatah facility, I was quite amazed to find the first name of an individual I like, that’s how I could figure out which trading firm is behind County Information Services, LLC, who built the antennas  – SIM].

The second site is just outside of Elburn, Illinois (41.926495, -88.499110°). The antennas here are log periodic like the others, but their structure is fundamentally different. Instead of using rigid aluminum tubing, this antenna is made from comparatively thin wire that is pulled taut by ropes and springs. The ropes attach to tall supporting trusses and to ground anchors to hold them in tension. This style of antenna is difficult to photograph because the wire doesn’t need to be very thick. I’ve overlaid blue surfaces on the photo to show the planes of the two stacked antennas.


Shortwave trading antenna site near Elburn, IL. Blue highlighting shows planes of antenna wires.

A search of the FCC experimental license database shows this site is licensed (by a firm named 10Band LLC) for a 20 kW transmitter with an ERP of 808 kW. The shortwave antenna is pointed at a 48º angle and Europe is well within the 38º beam width.

There is clearly a microwave dish antenna at this site, but I haven’t yet been able to find the FCC license for it. But I have been able to get a heading for the dish by taking GPS coordinates of photos taken along the beam path. It points at CME.

[When Bob and I started to map the shortwave antennas using the FCC database coordinates, my first move was to “watch” the facilities using Google Earth. For the Elburn site it’s useless…

Elbun, picture from Google Earth, 21/9/2015

… but thanks to this picture we learn the antennas were not there in September 2015. Someone told me to check another satellite imagery website, which is more up to date than Google Earth, and the antennas are there:

Elrbun antennas, picture from, 04/08/2018

By digging into the archive pictures, it seems like the antennas were erected in Elburn after May 2016. I got another picture of the site, sent by someone who wants to stay anonymous. I really don’t know who is he, but he has a lot of pictures of the various “HFT” shortwaves antennas, both in US and UK…

Elburn, picture from someone

That said, Bob’s picture below is more beautiful:

Elburn, picture from Bob

Last but not least, as always I was curious to know which trading firm is hiding behind the name 10Band LLC. Someone found that for me and sent me this ”Kane County Property Tax Inquiry“ link, where we can learn that the field where the antennas were erected was sold in 2011 for $1,338,325.00 to 10Band LLC, a firm in Chicago – I smiled when I recognized the address – SIM] 

Are you sure these antenna sites are really for shortwave trading and not a beacon for space alien body snatchers or something else?

I’m going to assume that space alien body snatchers wouldn’t bother with FCC licenses for their beacons. The sites I’m documenting here are all licensed to transmit on shortwave frequencies that could cross oceans.


Shortwave trading sites around Chicago. Solid lines are paths to London. Dashed lines are microwave links with CME.

Their shortwave antennas are all pointed at Europe. They all have a microwave link to CME. The IEEE Spectrum article on shortwave trading has deep links into the FCC database revealing the name of a trading company owning one of these sites.

What’s next?

I’m headed to the areas around New Jersey data centers to see if I can find shortwave antennas there.


[Nothing to do with shortwave trading here, but thanks to Bob I had a lot of fun with this website. In the US the FCC database does not include the licences for millimeter waves – millimeter wave frequencies are often less crowded than microwave frequencies, so millimeter waves are interesting in urban environments. Traders use millimeter waves both in London and Chicago. I searched for all the millimeter waves licences around Aurora and got a long list starting with this:

Boring, but I clicked on the kmz button and got quite an amazing Google Earth map (click to enlarge):

Aurora <-> Cermak

This map shows all the millimeter waves licences going from Aurora (CME) to Cermak (ICE) – including old licences that are far from the straight line between the two data centers. The line of sight is in yellow, and the first Fresnel Zone is in red. 

Then I searched the licences for the (New Jersey) Equity Triangle (Mahwah-Secaucus-Carteret). From above the triangle looks like that…

The Equity Triangle

…but it’s more amusing to watch it more closely:

The Equity Traingle millimeter waves networks, from Carteret (at the bottom)

The Equity Triangle millimeter waves networks, from Secaucus (at the bottom)

By the way, I say hello to the boss of the China cat! Perhaps the cat is somewhere in this 2160p video made with a drone in my backyard:

That’s all folks – SIM]

Shortwave Trading | Part I | The West Chicago Tower Mystery

Since 2014 this blog has extensively covered the wireless networks built by high-frequency trading (HFT) firms or network providers to reduce latencies between the different exchanges around the world (market makers need fast connectivity to manage risk, news traders also need to be fast, etc.). This epic investigation on microwave, which started with HFT in my backyard, will be fully reported in a book I’m currently writing (in French for now). As I’m quite busy with this writing (and other/more interesting matters about market structure), I didn’t really have the time to check out what I have been hearing about “shortwave” or “high frequency” radio. This is the way high-frequency trading firms may use shortwave radio to directly connect widely-separated locations (in short, traders are willing to use shortwave to cross oceans with less latency than any fiber – like Hibernia).
But recently I got more intel about the situation (and some fun anecdotes). With some help from the US, I found that a firm purchased a field for more than 1$M to build towers and antennas; with some help from the EU, I got hints about Germany; and I dug into UK public records.
I even met, last March in Amsterdam, people involved in those projects. Not surprisingly, at least five HFT/market making firms showed up behind the shell companies/names they use to hide. The usual suspects. Above all, I have been contacted recently by someone from Chicago, Bob, who decided to investigate the “shortwave” networks in his backyard. Today I’m pleased to host Bob as a new guest writer on this blog. This first part of the “Shortwave Trading” series is released at the same time Bob is talking about what he found at the STAC Summit in Chicago. Next parts will follow soon.

I’m Bob Van Valzah and I’m on a “gardening leave” between jobs working as a Performance Engineer for high-frequency trading firms in Chicago. I recently stumbled onto the first evidence of shortwave trading at a site in West Chicago, Illinois and then used Federal Communications Commission (FCC) database research techniques pioneered by the owner of this blog to find two more sites. My non-disclosure agreements with employers would typically prevent me from talking about this, but my trading-related discoveries are my own while on gardening leave. The results of my research may be of interest here and there, so I offered to do some guest posting on this blog. I’ll have to go quiet again in July when I head back to work.

It might be reasonable to assume that “West Chicago” was just a western part of Chicago, Illinois. In fact, it’s a city in its own right, twenty some miles west of the big city. A typical weekend will find me cycling down a bike path that runs nearby. In March, muddy path conditions caused me to detour through an industrial park in West Chicago where the West Chicago Tower Mystery began. I looked up from the handlebars and saw this tower.


Mysterious West Chicago Tower, March 10, 2018.

I’m an amateur radio operator, or “ham,” (KE9YQ) and those four big antennas look a lot like ones that a ham would use to talk across an ocean. I’ll just call them shortwave antennas here, but practitioners of aluminum feng shui (antenna design) will recognize them as log periodic. There’s also a microwave dish antenna between the top two shortwave antennas. This much I could tell just by looking.

Most of the radio towers you see each day are cell towers. There are 215,000 of them in the US. They differ from other radio towers in that they will almost always have one or more triangular structures with three or more directional antennas on each side of the triangle. A grid of cell towers covers an area with roughly hexagonal cells so that you get a good signal everywhere.

The West Chicago tower had no triangular structure, so I was pretty sure it wasn’t a cell tower. And these antennas were huge compared to regular cell tower antennas. I could literally see them 1/2 mile away. Some cell towers do have microwave dish antennas when it’s hard to bring fiber to a site, but shortwave antennas didn’t seem to go together with microwave in my mind.

Mystery #1: If this wasn’t a cell tower, what was it?

With my curiosity up, I pedaled to the base of the tower and took a look around. Like all cell towers, there’s a barbed wire perimeter fence and I could see a power meter where electricity enters the site. The panel allowed for up to four power meters because it’s common for two or more carriers to share a single site. There’s also a master power switch for each carrier so that they can shut off their juice for maintenance without knocking the other carriers off the air.


The tower base and perimeter fence.


The only power meter for the site.

I walked right up to the fence and zoomed in on the power meter. It said “U.S. Cellular.” They are indeed a regional cellular carrier, but they only serve 23 U.S. states and wouldn’t want their signals crossing any oceans.

Mystery #2: Why would a regional cellular carrier pay for power to cross oceans?
Riding on a hot day, I may stop for a drink in the shade of a cell tower, so I’ve seen what a lot of cell sites look like. There’s often a small building inside the perimeter fence to hold the equipment that runs the cell site. The ground inside the perimeter fence is typically coarsely crushed rock to prevent weeds from growing.

An odd thing about this “cell site” was that it had a garbage pile inside the fence. Cell sites are unmanned and don’t need much maintenance. Crews who do work there typically leave the site clean and take their garbage with them. There is no trash pickup at sites like this, so it seemed odd that there’d be cans full of lunch wrappers and cardboard boxes. If this was a cell site, it was maintained by much sloppier crews than the ones I’d typically seen.

One box in the garbage pile caught my eye so I zoomed in through the fence and got the best shot of the label I could with my iPhone. I had never heard of the company Ettus Research or the USRP X300 device. With all the cell sites in the world, you’d think they’d be made from off-the-shelf parts, not stuff cooked up in a research and development lab.


The label on an interesting box in the garbage pile.

Mystery #3: Why would a cell site need equipment from a research company?
Most any cell site with a tower will have a sign with a seven-digit number known as the FCC Antenna Structure Registration (ASR) number. If you were a cellular carrier out shopping for a good place to put your antennas, you could use this number to find the height of the tower and get other useful nuggets from the FCC database. I took a picture of the number since I thought it might come in handy when I got home.


U.S. Cellular sold the tower in 2014.

Back home, I pulled up the FCC ASR database and found that the tower was indeed built by U.S. Cellular in 2009. Digging deeper, I also found a record that they had sold it in late 2014. This sort of transaction is pretty common in the business. As subscribers come and go, cellular carriers have to move their cell sites and keep adjusting their antenna heights to maintain good coverage everywhere.

Google Street View is a wonderful tool for looking at the way the world used to be. I found a view of the tower from August 2012 when it had already been picked clean of all cellular antennas (they have resale value!), with only the tell-tale triangular mounting structure remaining at the top of the tower.

West Chicago Tower 8:2012

The tower as it looked in August 2012.

So part of the history was becoming clear. The tower was built by U.S. Cellular in 2009, but fell into disuse sometime before 2012. It was eventually sold in late 2014.

As is common with cell sites these days, the tower site was sold to Vertical Bridge, an antenna site management company. Instead of owning antenna sites themselves, it now seems common for carriers to just lease space on towers at antenna sites owned by management companies. So that’s no real clue about current ownership or usage of the tower.

Mystery #4: Where is the other end of that microwave link?
Microwave links require a license for operation, so I returned to the FCC databases and looked for licenses associated with that tower. Each license gives the GPS coordinates of both ends of the link and the FCC has a helpful mapping function. It showed a direct link between the West Chicago tower and another tower right by the Chicago Mercantile Exchange! It was still just circumstantial evidence, but this was the first good clue that the West Chicago tower had something to do with trading. It was looking less and less like spooks were using the tower.


FCC map of microwave connection between CME and West Chicago tower.

EttusResearchUSRP X300

Top-of-the-line software defined radio.

Mystery #5: What was in that box in the garbage pile?
Google helpfully explains that Ettus Research is the leading provider of Software Defined Radios (SDR). These are the devices you need to make any kind of custom radio you want. Just change the software and you can send voice, pictures, video, or trading information. The particular model in the box is their top-of-the line, with an FPGA, two 10 gigabit Ethernet ports, and a PCIe bus interface. The pair that was in that box cost nearly $10,000. You don’t need gear like this at a cell site.

Mystery #6: What could be interesting across an ocean?
I’m much better with the technology of trading rather than understanding how to make money with trading. But it seemed like a reasonable guess that prices on the markets at CME would be correlated with activity in European markets – let’s say, in Slough (UK) and Frankfurt (Germany). So I fired up Google Earth and plotted the lines that a radio signal would have to travel between West Chicago and the markets in London and Frankfurt.


Shortest paths between West Chicago and European markets.

We are so used to seeing flattened projections of earth that it’s easy for a Chicagoan to think of Europe as being east of Chicago. But in fact the shortest way to Europe is northeast, at about a 45º angle.


For radio, Europe is northeast of Chicago.

This angle is important because those shortwave antennas on the tower are directional. If you know you want to talk to Europe, why send any of your signal toward Guam? Directional shortwave antennas focus your signal in the direction of the pointy end of the antenna. In the photo of the tower above, I’m standing right under the path where the top antenna is pointing.

At shortwave frequencies, it’s difficult to make antennas with a narrow beam width. London and Frankfurt are only about 5º apart when you’re aiming from Chicago, so one antenna should hit both cities. This raises the question of why the tower needed four shortwave antennas, all pointed in pretty much the same direction.

Some of the antennas on the tower focused their signal well, producing a more powerful signal, but only operate over a narrow range of shortwave frequencies. Others operate over a wide range of frequencies, but can’t produce a strong signal.


The lower two antennas have been removed from the tower.

It also appeared that the second shortwave antenna up from the bottom had been damaged in a wind storm or perhaps poorly installed because four of its five elements had been knocked significantly out of the horizontal plane. Nonetheless, I was surprised when I visited site a few weeks later and found that the lower two antennas had been removed. So this site is being actively developed in the spring of 2018. They’re moving antennas around and they haven’t gotten rid of the garbage pile, so there’s still work to do.

Bringing it all together, I’ve discovered that this West Chicago tower has all the ingredients needed to make a low-latency transatlantic market connection. I’ve also found two other sites around Chicago with massive shortwave antennas pointed at Europe and microwave links to CME, so there’s more than one horse in this race. I’ll document these sites in a coming post. Licenses also exist on the east coast. I’ll be looking for them on trip in mid-June. FCC searches have also turned up licenses in Anchorage, Alaska which is on the path from CME to Tokyo [Sniper’s note: that reminds me I didn’t check recently what is going on around Go West]. Spotters are already at work looking for antennas around London and Frankfurt.

Somewhere around Slough (UK), March 2018

Shortwave is no panacea. It’s unreliable, expensive, and very low bandwidth. Think dialup speeds. But you can’t beat it for latency. I plan to go into more detail on shortwave tradeoffs in a future post. You might be wondering if anybody can receive their signal, perhaps with the possibility of getting an order to market faster. Yes, anybody can receive it, but the sender would be foolish not to encrypt it in a way that can’t be cracked. This is easily done without impacting performance.

A muddy bike path diverted me from my usual route and I happened upon the tower. Being a ham, I recognized the shortwave antennas. I could see the potential, having worked in trading. I’m on gardening leave so I can talk publicly about what I found related to trading – I’ve just assembled the public records, photos, maps, background info, and sprinkled in my analysis, with some inspiration from the way this blog investigated the microwave networks. The next post from me will describe the differences between microwave, shortwave, fiber, and satellite. Stay tuned.

Somewhere in Kane County (US), April 8th, 2018