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Nasdaq halts high-speed trading service after regulatory pressure US exchange ends $10,000 a month fast fibre optic business following complaints from rivals Nasdaq had been marketing to selected customers a new fibre optic cable that cuts the time to execute trades on its market by up to a third © Sarah Yenesel/EPA-EFE/Shutterstock Nasdaq halts high-speed trading service after regulatory pressure on x (opens in a new window) Nasdaq halts high-speed trading service after regulatory pressure on facebook (opens in a new window) Nasdaq halts high-speed trading service after regulatory pressure on linkedin (opens in a new window) Save current progress 100% George Steer in New York Published 13 HOURS AGO 17 Print this page Unlock the Editor’s Digest for free Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter. Nasdaq will end an undisclosed high-speed trading service it offered to a handful of its client trading firms after coming under scrutiny from US regulators. The US stock exchange had been marketing to selected customers a new fibre optic cable that cuts the time to execute trades on its market by up to a third, drawing the ire of competitors who were unaware of the unpublicised service. The dispute underscores how the technological arms race that underpins modern day trading is heating up again as cheaper and more efficient equipment becomes available. In February US telecoms group McKay Brothers complained to the US stock market regulator that Nasdaq was “covertly” offering some customers access to hollow-core fibre optic cables, which can carry trading data far quicker than the standard solid-core counterparts. When approached for comment by the Financial Times, Nasdaq said: “In close consultation with the regulator and our clients, Nasdaq has begun discontinuing the service.” In the past services for high-speed traders have been controversial, leading to accusations that exchanges favour one set of customers over others. Exchanges, under pressure from shareholders, compete with rival service providers and high-speed firms in spending millions of dollars on physical infrastructure such as microwave antennas, cables and short wave transmitters, to shave microseconds off the time it takes to do deals. Global equity markets are dominated by high-frequency trading firms that use complex algorithms to spot price patterns and automatically place huge volumes of very small trades. For firms seeking out arbitrage pricing discrepancies that can last for as little as 10 millionths of a second, even tiny speed increases translate into a critical advantage. In its letter to the US Securities and Exchange Commission, McKay alleged that Nasdaq — the second most active stock trading venue in the US by volume after the New York Stock Exchange — had been selling the right to upgrade to the faster cables for an additional monthly fee of $10,000, without publicly disclosing that it was doing so. McKay said it had assumed Nasdaq provided solid-core cables to all of its customers. “Several market participants were as surprised as we were to learn that Nasdaq covertly provides select market participants with such a latency improvement option,” said McKay Brothers’ chief financial officer Jim Considine, in a letter dated February 12. Bill Singer, a lawyer and former regulator at the American Stock Exchange, said “a given stock exchange’s reputation rises and falls to the extent that traders and investors repose confidence in the integrity of that operator”. “The disconcerting aspect of Nasdaq’s alleged conduct is that it involves a failure to disclose . . . Disclosure is the very bedrock upon which the federal securities laws are based.” Nasdaq is upgrading its main data centre in Carteret, New Jersey, to cope with capacity shortages. It will also undertake an “Equalisation Project” to ensure a level playing field for customers who have placed their servers in Nasdaq’s building to be as close as possible to the exchange’s matching engines, where trading takes place. Nasdaq said in a filing that it designed the original data centre “at a time when latency differences were measured by customers in terms of miles of cable between customer facilities and exchange data centres, rather than in feet or inches within exchange data centres, as is the case today.” But McKay Brothers said in its letter to the SEC that the availability of hollow-core fibre at Nasdaq’s data centre meant some connections may be “faster than others even where those connections have an identical length”. Copyright The Financial Times Limited 2025. All rights reserved. Reuse this content(opens in new window)CommentsJump to comments section Follow the topics in this article US & Canadian companies Add to myFT Telecoms Add to myFT High frequency trading Add to myFT Equities Add to myFT Markets Add to myFT Latest on High frequency trading High frequency trading Human traders are valuable, actually! Hedge funds Jane Street and Millennium settle legal dispute over trading strategy Citadel LLC Citadel Securities aims to become ‘material player’ in Eurozone bond trading The FT ViewThe editorial board The new titans of Wall Street New titans of Wall Street — an FT series Is Chicago’s Don Wilson the smartest man in trading? High frequency trading Jump Trading, Virtu and the ‘hidden optical fibre cable’ under an Ohio field High frequency trading The ‘mundane economics’ of trading at the speed of light News in-depthHigh frequency trading New titans of Wall Street — an FT series Comments Useful links Support View Site Tips Help Centre Contact Us About Us Accessibility myFT Tour Careers Suppliers Legal & Privacy Terms & Conditions Privacy Policy Cookie Policy Manage Cookies Copyright Slavery Statement & Policies Services Share News Tips Securely Individual Subscriptions Professional Subscriptions Republishing Executive Job Search Advertise with the FT Follow the FT on X FT Channels FT Schools Tools Portfolio FT App FT Digital Edition FT Edit Alerts Hub Business School Rankings Subscription Manager News feed Newsletters Currency Converter Community & Events FT Live Events FT Forums Board Director Programme More from the FT Group Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2025. 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George Steer Published OCT 28 2024 16 Print this page Get ahead with daily markets updates.Join the FT's WhatsApp channel Financial markets are full of quirky, monetisable correlations. When, for example, the price of the S&P 500 E-mini (which is traded on the Chicago Mercantile Exchange) rises or falls, the Dax future (traded 7,000km away on the Eurex market in Germany) tends to do the same thing a few milliseconds later. A trader with a fast enough network could therefore make a (very) quick profit by buying or selling the FDAX whenever the E-mini moves accordingly and waiting for everyone else to catch up. Such advantages invite accusations that the game is rigged in favour of the fastest firms. Latency arbitrage — the exploitation by high-frequency traders of the infinitesimal amounts of time it takes price signals from one exchange to reach another — has over time become faster, more sophisticated and increasingly pernickety. Earlier this month, the speed race being run by some of the world’s biggest HFT companies reached the Northern District Court of Illinois (h/t to FTAV reader ChicagoLocal.) Indiana-based market infrastructure firm Skywave Networks had grand plans. In 2016, the company said it was ready to commercialise its new, superfast shortwave radio technology, which — unlike widely-used “line of sight” microwaves — could be refracted off the ionosphere and therefore used to transmit information around the curvature of the Earth. Shortwave radio can conventionally carry far less information than optical fibre or microwave, but Skywave said its “innovative and patented” technology addressed this low bandwidth problem head on. Skywave claims this tech, once rolled out, would provide latency arbitrageurs with a “quantum leap in communications speed, particularly for transoceanic communications”. By March 2017, according to October’s court filing, Skywave said it had “assessed and selected” transmitter and receiver sites in the US and Europe and was close to applying for the Federal Communications Commission-issued commercial licence required to transmit shortwave signals. But there was a snag. Skywave alleges that at roughly the same time, other parties including Wall Street behemoths Jump Trading and Virtu Financial and rival infrastructure firms including New Line Networks (NLN) began using more relaxed experimental licences to send shortwave signals more efficiently than Skywave ever could. Skywave is unhappy about this. From the court filing (emphasis our own): This action arises from Defendants’ long-term, continuous racketeering and conspiracy scheme to fraudulently obtain experimental shortwave radio licenses from the Federal Communications Commission (“FCC”) to create a commercial trading network, unlawfully use those experimental licenses for commercial trading of financial instruments (“Commercial Trading”), and leverage the ill-gotten advantages of experimental licenses to maximize their own financial benefit and to the detriment of their competitors. Jump declined to comment. Virtu and Skywave did not respond to requests for comment. A spokesperson for wireless network provider NLN said: “We completely dispute these baseless accusations, believe the claims are wholly without merit, and intend to defend ourselves vigorously.” Experimental licences have more bandwidth than commercial licences, allow for “frequency hopping” and do not include expensive transmission power requirements, Skywave argues. Skywave supposedly lost lots of money as a result and says there is evidence to back up its allegations of the defendants’ impropriety (our emphasis): In 2022, Skywave discovered that a German company, Deutsche Börse, offered a market analytics tool called A7. The A7 tool enabled examination of CME and Eurex trading data for evidence of trading using shortwave networks. Using the A7 tool, Skywave discovered evidence of shortwave trading. For example, the A7 tool showed two different latencies for latency arbitrage trading of the E-Mini (abbreviated as “ES” in Figure 1) and the FDAX. First, E-Mini price moves on the CME correlated with FDAX trading activity on the Eurex peaking approximately 37 milliseconds later. That 37-millisecond latency indicates trading over networks comprised of conventional optical fibre and microwave transmitters. Second, the A7 data also showed E-Mini price moves on the CME correlated with FDAX trading activity on the Eurex peaking approximately 28 milliseconds later. That relatively low 28-millisecond latency indicates trading over networks that included shortwave transmissions (High-res) Defendants used their experimental licences to beat the market by 9 milliseconds, according to the complaint, transmitting trading signals from Illinois to Germany “faster than any other trader can legally do via optical fibre and microwave networks alone or a network that includes shortwave transmitters operated under a commercial licence”. In short, Skywave is claiming Virtu, Jump and the rest of the defendants cheated: cutting corners by not waiting for a commercial licence as Skywave had done. To “expand the scope of their scheme,” Skywave further alleges that defendants — now operating through several shell companies — constructed a shortwave transmission station in Ontario, Canada, to connect to their broader trading network, including a microwave link in Dunbridge, Ohio, and another “across the street”. (High-res) Skywave alleges that: Instead of connecting these two microwave network links through an FCC license, which might have alerted U.S. regulators, Defendants built or caused to be built a hidden optical fiber cable that travels under a private driveway to connect the RuralConnect microwave link to the NLN microwave link. Figure 6 shows an aerial photograph of the hidden optical fiber’s path between the link labelled WROX998 and the link labelled WQQE624. (High-res) This “hidden optical fiber cable” connects the defendants’ shortwave transmission station in Ontario to their wider trading network, Skywave adds. Shenanigans of the sort Skywave is alleging are pretty common in the HFT space, where macho nerds dominate and every millisecond counts. The court filing notes how, in 2012, one HFT firm spent around $300mn to build a domestic network to save 3 milliseconds. In Trading at the Speed of Light, Donald MacKenzie describes one trader whose link ran “via antennas on a van he persuaded the owner of a bowling alley near a New Jersey data centre to allow him to leave in the bowling alley’s car park”. Whether Skywave’s allegations amount to anything material for Jump, Virtu and the other defendants is now a matter for a judge. Emerging Markets: London AM, every weekday Be briefed on emerging markets each morning, London time. Unsubscribed from Emerging Markets: London AM newsletterNewsletter sign up to Emerging Markets: London AM Copyright The Financial Times Limited 2025. All rights reserved. Reuse this content(opens in new window)CommentsJump to comments section Follow the topics in this article High frequency trading Add to myFT Markets Add to myFT Virtu Financial Inc Add to myFT FT Alphaville Add to myFT George Steer Add to myFT Latest on High frequency trading High frequency trading Nasdaq halts high-speed trading service after regulatory pressure High frequency trading Human traders are valuable, actually! Hedge funds Jane Street and Millennium settle legal dispute over trading strategy Citadel LLC Citadel Securities aims to become ‘material player’ in Eurozone bond trading The FT ViewThe editorial board The new titans of Wall Street New titans of Wall Street — an FT series Is Chicago’s Don Wilson the smartest man in trading? High frequency trading The ‘mundane economics’ of trading at the speed of light News in-depthHigh frequency trading New titans of Wall Street — an FT series Comments Useful links Support View Site Tips Help Centre Contact Us About Us Accessibility myFT Tour Careers Suppliers Legal & Privacy Terms & Conditions Privacy Policy Cookie Policy Manage Cookies Copyright Slavery Statement & Policies Services Share News Tips Securely Individual Subscriptions Professional Subscriptions Republishing Executive Job Search Advertise with the FT Follow the FT on X FT Channels FT Schools Tools Portfolio FT App FT Digital Edition FT Edit Alerts Hub Business School Rankings Subscription Manager News feed Newsletters Currency Converter Community & Events FT Live Events FT Forums Board Director Programme More from the FT Group Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2025. FT and ‘Financial Times’ are trademarks of The Financial Times Ltd. The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice.
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Jump Trading, Virtu and the ‘hidden optical fibre cable’ under an Ohio field Skywave Networks accuses Wall Street titans of ‘continuous racketeering and conspiracy’ Jump Trading, Virtu and the ‘hidden optical fibre cable’ under an Ohio field on x (opens in a new window) Jump Trading, Virtu and the ‘hidden optical fibre cable’ under an Ohio field on facebook (opens in a new window) Jump Trading, Virtu and the ‘hidden optical fibre cable’ under an Ohio field on linkedin (opens in a new window) Share Save current progress 100% George Steer Published OCT 28 2024 16 Print this page Get ahead with daily markets updates.Join the FT's WhatsApp channel Financial markets are full of quirky, monetisable correlations. When, for example, the price of the S&P 500 E-mini (which is traded on the Chicago Mercantile Exchange) rises or falls, the Dax future (traded 7,000km away on the Eurex market in Germany) tends to do the same thing a few milliseconds later. A trader with a fast enough network could therefore make a (very) quick profit by buying or selling the FDAX whenever the E-mini moves accordingly and waiting for everyone else to catch up. Such advantages invite accusations that the game is rigged in favour of the fastest firms. Latency arbitrage — the exploitation by high-frequency traders of the infinitesimal amounts of time it takes price signals from one exchange to reach another — has over time become faster, more sophisticated and increasingly pernickety. Earlier this month, the speed race being run by some of the world’s biggest HFT companies reached the Northern District Court of Illinois (h/t to FTAV reader ChicagoLocal.) Indiana-based market infrastructure firm Skywave Networks had grand plans. In 2016, the company said it was ready to commercialise its new, superfast shortwave radio technology, which — unlike widely-used “line of sight” microwaves — could be refracted off the ionosphere and therefore used to transmit information around the curvature of the Earth. Shortwave radio can conventionally carry far less information than optical fibre or microwave, but Skywave said its “innovative and patented” technology addressed this low bandwidth problem head on. Skywave claims this tech, once rolled out, would provide latency arbitrageurs with a “quantum leap in communications speed, particularly for transoceanic communications”. By March 2017, according to October’s court filing, Skywave said it had “assessed and selected” transmitter and receiver sites in the US and Europe and was close to applying for the Federal Communications Commission-issued commercial licence required to transmit shortwave signals. But there was a snag. Skywave alleges that at roughly the same time, other parties including Wall Street behemoths Jump Trading and Virtu Financial and rival infrastructure firms including New Line Networks (NLN) began using more relaxed experimental licences to send shortwave signals more efficiently than Skywave ever could. Skywave is unhappy about this. From the court filing (emphasis our own): This action arises from Defendants’ long-term, continuous racketeering and conspiracy scheme to fraudulently obtain experimental shortwave radio licenses from the Federal Communications Commission (“FCC”) to create a commercial trading network, unlawfully use those experimental licenses for commercial trading of financial instruments (“Commercial Trading”), and leverage the ill-gotten advantages of experimental licenses to maximize their own financial benefit and to the detriment of their competitors. Jump declined to comment. Virtu and Skywave did not respond to requests for comment. A spokesperson for wireless network provider NLN said: “We completely dispute these baseless accusations, believe the claims are wholly without merit, and intend to defend ourselves vigorously.” Experimental licences have more bandwidth than commercial licences, allow for “frequency hopping” and do not include expensive transmission power requirements, Skywave argues. Skywave supposedly lost lots of money as a result and says there is evidence to back up its allegations of the defendants’ impropriety (our emphasis): In 2022, Skywave discovered that a German company, Deutsche Börse, offered a market analytics tool called A7. The A7 tool enabled examination of CME and Eurex trading data for evidence of trading using shortwave networks. Using the A7 tool, Skywave discovered evidence of shortwave trading. For example, the A7 tool showed two different latencies for latency arbitrage trading of the E-Mini (abbreviated as “ES” in Figure 1) and the FDAX. First, E-Mini price moves on the CME correlated with FDAX trading activity on the Eurex peaking approximately 37 milliseconds later. That 37-millisecond latency indicates trading over networks comprised of conventional optical fibre and microwave transmitters. Second, the A7 data also showed E-Mini price moves on the CME correlated with FDAX trading activity on the Eurex peaking approximately 28 milliseconds later. That relatively low 28-millisecond latency indicates trading over networks that included shortwave transmissions (High-res) Defendants used their experimental licences to beat the market by 9 milliseconds, according to the complaint, transmitting trading signals from Illinois to Germany “faster than any other trader can legally do via optical fibre and microwave networks alone or a network that includes shortwave transmitters operated under a commercial licence”. In short, Skywave is claiming Virtu, Jump and the rest of the defendants cheated: cutting corners by not waiting for a commercial licence as Skywave had done. To “expand the scope of their scheme,” Skywave further alleges that defendants — now operating through several shell companies — constructed a shortwave transmission station in Ontario, Canada, to connect to their broader trading network, including a microwave link in Dunbridge, Ohio, and another “across the street”. (High-res) Skywave alleges that: Instead of connecting these two microwave network links through an FCC license, which might have alerted U.S. regulators, Defendants built or caused to be built a hidden optical fiber cable that travels under a private driveway to connect the RuralConnect microwave link to the NLN microwave link. Figure 6 shows an aerial photograph of the hidden optical fiber’s path between the link labelled WROX998 and the link labelled WQQE624. (High-res) This “hidden optical fiber cable” connects the defendants’ shortwave transmission station in Ontario to their wider trading network, Skywave adds. Shenanigans of the sort Skywave is alleging are pretty common in the HFT space, where macho nerds dominate and every millisecond counts. The court filing notes how, in 2012, one HFT firm spent around $300mn to build a domestic network to save 3 milliseconds. In Trading at the Speed of Light, Donald MacKenzie describes one trader whose link ran “via antennas on a van he persuaded the owner of a bowling alley near a New Jersey data centre to allow him to leave in the bowling alley’s car park”. Whether Skywave’s allegations amount to anything material for Jump, Virtu and the other defendants is now a matter for a judge. Emerging Markets: London AM, every weekday Be briefed on emerging markets each morning, London time. Unsubscribed from Emerging Markets: London AM newsletterNewsletter sign up to Emerging Markets: London AM Copyright The Financial Times Limited 2025. All rights reserved. Reuse this content(opens in new window)CommentsJump to comments section Follow the topics in this article High frequency trading Add to myFT Markets Add to myFT Virtu Financial Inc Add to myFT FT Alphaville Add to myFT George Steer Add to myFT Latest on High frequency trading High frequency trading Nasdaq halts high-speed trading service after regulatory pressure High frequency trading Human traders are valuable, actually! Hedge funds Jane Street and Millennium settle legal dispute over trading strategy Citadel LLC Citadel Securities aims to become ‘material player’ in Eurozone bond trading The FT ViewThe editorial board The new titans of Wall Street New titans of Wall Street — an FT series Is Chicago’s Don Wilson the smartest man in trading? High frequency trading The ‘mundane economics’ of trading at the speed of light News in-depthHigh frequency trading New titans of Wall Street — an FT series Comments Useful links Support View Site Tips Help Centre Contact Us About Us Accessibility myFT Tour Careers Suppliers Legal & Privacy Terms & Conditions Privacy Policy Cookie Policy Manage Cookies Copyright Slavery Statement & Policies Services Share News Tips Securely Individual Subscriptions Professional Subscriptions Republishing Executive Job Search Advertise with the FT Follow the FT on X FT Channels FT Schools Tools Portfolio FT App FT Digital Edition FT Edit Alerts Hub Business School Rankings Subscription Manager News feed Newsletters Currency Converter Community & Events FT Live Events FT Forums Board Director Programme More from the FT Group Markets data delayed by at least 15 minutes. © THE FINANCIAL TIMES LTD 2025. FT and ‘Financial Times’ are trademarks of The Financial Times Ltd. The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice