Microwaves transmit stock trades faster than fibre optics

Jeff Hecht, contributor

Nowhere is the phrase "time is money" taken more seriously than in the world of high-frequency securities "flash" trading, where the goal is to profit by being first to react to price differences between markets. Trying to tap that market, telecommunications companies are spending hundreds of millions of dollars laying submarine cables through the Arctic Ocean to shave milliseconds off the transit time between Tokyo and London.

Now the Wall Street Journal is reporting that traders are turning to old-fashioned microwave relay towers to speed deals between New York and Chicago. The newspaper reports that 10 companies have filed applications with the Federal Communications Commission to build such links.

Why microwaves? Is the speed of light too slow, as traders have complained? The Journal reports that microwaves take 4.25 milliseconds to travel between New York and Chicago, beating the 6.55 milliseconds for infrared light traveling through a fibre-optic cable, attributing the difference to more bends in the cable.

That's not quite right. Both light and microwaves are electromagnetic waves, so they should travel at the cosmic speed limit of about 300,000 kilometres per second. At that speed, they should take only about 4 milliseconds to make the 1200-kilometre journey between Chicago and New York.

But that universal speed limit occurs when electromagnetic waves move through a vacuum - they travel more slowly through materials. Light signals travel through the glass core of an optical fibre at about 200,000 kilometres per second. By contrast microwaves go through air, which barely slows them down at all. In the world of high stakes flash trading, even that small difference adds up to big money.

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