Northern lights: Arctic fiber nets open new bandwidth horizon

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The sea ice atop the Arctic Ocean, July 12, 2011

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.

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