NYSE Antennas Spark High-Speed Trader Backlash

The New York Stock Exchange is under fire over a pair of antennas designed to shave two millionths of a second off the time it takes for high-frequency traders to access its computer systems.

Some of the most vocal opponents are high-frequency traders.

Last month, electronic-trading giant

Virtu Financial
Inc.


VIRT -18.15%

blasted the NYSE’s plan to add the new equipment to the roof of its data center in Mahwah, N.J. Virtu said in a letter to the Securities and Exchange Commission that the initiative is unfair because trading firms will have to pay hefty fees to access the antennas.

Raise the Roof

New antennas on top of the New York Stock Exchange’s data center could speed up a network affiliated with the NYSE and hurt competing networks. Other firms’ networks use antennas connected to the building by more than 1,000 feet of fiber-optic cable.

Location of antennas at NYSE data center

Site of new

roof antennas

Location of antennas at NYSE data center

Site of new

roof antennas

Location of antennas at NYSE data center

Site of new

roof antennas

Location of antennas at NYSE data center

Site of new

roof antennas

The reason: The NYSE is expected to give its own affiliated network provider, called SFTI, exclusive access to the rooftop antennas, Virtu said. That means there wouldn’t be any cheaper providers that can offer the same superfast access. If trading firms want to keep up, they would have to use SFTI and pay its fees.

“The NYSE is just looking for ways to use its monopolistic advantage to charge premium prices,” Virtu Chief Executive Officer Douglas Cifu said in an interview.

Representatives of the NYSE and the SEC declined to comment. The NYSE is a unit of Intercontinental Exchange Inc., or ICE.

The spat is the latest twist in the ultrafast trading arms race. High-frequency traders make money through rapid-fire trading of stocks, futures and other assets. They must relentlessly adopt the fastest technology, or risk losing out. If a firm doesn’t use the quickest available network, for instance, it will be preyed upon by competitors that can act on market-moving information a split-second faster.

A technician working on the roof of the New York Stock Exchange’s data center in Mahwah, N.J., in June. The two white, dish-shaped antennas near him were recently added.


Photo:

Uncredited

Over the years, the industry has spent hundreds of millions of dollars on technology like cross-country microwave networks. Even some high-frequency traders say the race is wasteful and offers little benefit to ordinary investors. But it benefits exchanges like the NYSE and Nasdaq Inc., which charge traders for fast access to their systems.

Electronic-trading firms and Wall Street banks say stock exchanges have ratcheted up such fees in recent years.

“What the exchanges have done is create a race condition to get to their quotes as quickly as possible and sell access to them to the highest bidder,” said Sal Arnuk, a partner at brokerage Themis Trading.

Exchanges say their fees are reasonable. Nasdaq declined to comment.

At the heart of the fight is a pair of white, dish-like antennas atop the NYSE’s data center off New Jersey’s Route 17.

A person familiar with the matter said the antennas were installed two or three months ago and shared photographs of them with The Wall Street Journal, although it couldn’t be learned whether the antennas have been activated.

Share Your Thoughts

Should exchanges be adding equipment to give high-frequency traders faster access? Why or why not? Join the conversation below.

The idea of the rooftop antennas is to send signals from the Mahwah data center to another set of antennas mounted on a nearby, 160-foot pole, replacing a span of fiber-optic cable, NYSE representatives told local officials while they were seeking approval for the additions earlier this year. That speeds up the network, because signals travel through air faster than through cable.

“The whole point of doing the wireless links is to reduce the [reliance] on fiber and make the data delivery faster, as fast as it can be,” Sanjam Kaur, an ICE engineer, said in a March 20 meeting of the Mahwah Board of Adjustment, a zoning body.

Ms. Kaur didn’t respond to requests for comment. A spokeswoman for the Mahwah local government declined to comment.

From that 160-foot pole, which stands just in front of the data center, signals move on through SFTI’s wireless network linking U.S. stock exchanges. The antennas give a tiny improvement of about two-millionths of a second, according to Virtu. That is significant because it threatens a rival network run by McKay Brothers, a firm that builds communications infrastructure for high-frequency traders.

To stay competitive, McKay would need to replace over 1,000 feet of cable connecting its network to the data center with a wireless link—which would require having its own roof antenna. But McKay says the NYSE is denying rooftop access to rival firms even though there is room for many antennas.

“McKay believes that reserving roof access for a single provider has absolutely no technical justification,” said Bob Meade, the firm’s co-founder. “It is simply a way to gain an advantage for a service that would otherwise be subject to competition.”

Write to Alexander Osipovich at alexander.osipovich@dowjones.com

Copyright ©2019 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8

]

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *

error: Content is protected !!