Northern lights: Arctic fiber nets open new bandwidth horizon

The sea ice atop the Arctic Ocean, July 12, 2011 Credit: Source: NASA Goddard Photo and Video/Flickr

Big data is driving the need for big networks – networks that can shave milliseconds off transmission times.

What would you pay to save 20 milliseconds? Two trans-oceanic projects are betting you'll pay enough to cover the cost of sinking new fiber optic cable, estimated to be between $600 million and $1.5 billion apiece.

Arctic Fibre Inc. and Arctic Cable Company LLC will provide high-bandwidth, high-capacity network connections from Europe to Asia via the Arctic Ocean. Possible now only because of the dramatic reduction of ice coverage in the Arctic Circle, the projects promise to reduce the time packets flow from London to Tokyo by 20 milliseconds.

Although the added network capacity will benefit telemedicine and distance education for communities in the remote Arctic regions, the most obvious gain will be for financial services firms that use high-frequency trade (HFT) systems to buy and sell equities on the global markets. For them, 20 milliseconds can make the difference between profits and losses.

How much profit or loss? Not much per trade, but it's volume that counts in the world of HFTs. For example, the Wall Street Journal (subscription required) reported that the difference of less than three milliseconds for a given trade could cost 0.08 cents (eight hundredths of a cent) per share traded in an HFT exchange. With more than 3 billion shares traded daily on average on the New York Stock Exchange alone, those fractions of pennies add up quickly.

HFTs now constitute more than 70% of the trading activity in U.S. markets. And HFTs are becoming more popular in Europe and Asia, undoubtedly an incentive to investors in the cable projects that would spur more ultra-low-frequency trades. It's little wonder HFTs are dominating activity on financial markets, experts say. That's because while they are extremely short-term investments, lasting as little as a few seconds, they provide market liquidity and high probability of small yet consistent profits.

Ultimately, all kinds of businesses will benefit. As big data meets big bandwidth, these new 40 gigabit-per-second links through the Arctic Ocean will put more pressure on analytics vendors to push real-time tools capabilities even further to serve the financial services sector and other industries as well.

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