Business At The Speed Of Light - What is Millisecond Worth? - Tony Greenberg

The lowlatency world of highspeed computing is turning financial markets news providers online media and many other businesses on their heads Some players will lose no matter how smart their systems and people Can you catch up Or should we slow them downSpeed thrills especially near the speed of light For Wall Street traders speed creates new fortunes on the world39s fastest networks for makers and users bothBut those technologies require lots of money and brainpower creating questions about unfair advantages for privileged insiders with the fastest networks and best relationships even as regulators ponder what to doWelcome to the future where winners are determined by who arrives first with the most intelligence Whether it39s making a killing with a milliondollar trade shipping the hottest financial news milliseconds faster than any competitor buying prime slots for online video ads or even snagging choice concert tickets or sniping an eBay auction technology39s next big leap is arriving in many corners of business Lowlatency networks will reshape most industries even if those industries39 networks need never approach the speed of lightMy first whiff of media and speed was while at Exodus being hired by MSNBC head of operations in 1997 It was their commitment to delivering Election 98 news faster than CNN who was currently the leader Back then measurement was a combination of Keynote Systems and an online research panel 300 servers and thousands of hours later we beat them hands down And for a while they retained the heavyweight title of quotKing of Speedquot That meant oodles of dollars from advertisersFinding Alpha Between Each Tick of the ClockThrough my firm RampRate I have watched companies pay big money to get even a mile closer to the trading floor Trading speeds have accelerated to millionths of a second with nanosecond reactions coming Sophisticated financial traders are zipping in and out of positions in less than a heartbeat generating billions of dollars in arbitrage profitsamp160quotThe people who are upset with the leaders of the pack for being like genetically altered Olympic hopefuls hopped up on performanceenhancing drugs are people who want to be big playersquot says Chuck Ocheret formerly head of Deutsche Bank39s platform solutions quotBut they don39t have good alphageneration principles and aren39t smart enough to achieve ultralow latencies anywayquotBut are the millions spent optimizing latency some of which trickle down to my company which advises companies on the right colocation centers and networks truly creating market efficiency Who really needs this speedHow Low Is Low Depends on Your BusinessLow latency is heady stuff But not all industries need to flirt with the speed of light t to create competitive opportunities now What counts as low latency in your industry will be a crucial differentiator in your successquotLatency matters a lot and means different things depending on where you are in the value chainquot says former BBC and CBS digital chief Mark Kortekaas quotOn the one extreme are the highfrequency traders where physical distance is crucial On the other is the time it takes for an end user to see your service Google has said even halfasecond delays to search results can significantly drop trafficquotSo speed is vital but so is and endusers perception Companies such as Gomez and Keynote prevent latency gaffes a user might notice that can affect brand image customer satisfaction and employee productivity Slow can be a blow no matter the industryThe most likely immediate lowlatency candidates are industries with lots of bidding or trading and massive data analysis Financial news outlets are obvious candidates the velocity of information they transmit creating arbitrage potential for their wealthy clients Companies such as Activ Financial not only get the news to traders faster but interpret it tooAuction sites are ripe for adjustment as seen with eBay quotsniping attacksquot So too is the legalized gambling of the penny auction Second place in a penny auction is worse than not playing because you39ve spent money on all those penny bids yet bought nothingRealtime bidding systems that optimize placement of online video ads can benefit too nabbing prime placements while saving customers money in a datadriven fastgrowing business whose importance will only grow as more highvalue video content makes its way to legal online outletsSTATS LLC provides sports fans bettors rich fast data on 234 sports including pitchbypitch and playbyplay updates using the same analytic concepts used in financial markets Betfaircom the UK gambling giant uses highfrequency data to respond to news that causes rapid adjustments of prices and oddsWho Profits The Infrastructure PlayIn my work I39ve seen buyer approaches range from bashful to brazen Some clients strongly prefer specific geographic and network topology locations that we know are extremely close to trading floors Others say money is almost no object if it speeds their LondonSingapore link by 10 millisecondsquotIt can be difficult to imagine how milliseconds or nanoseconds of latency make a significant differencequot says Internet technologist and RampRate CTO Steve Hotz quotbut from the viewpoint of a data transaction making the trip hundreds or thousands of times that incremental advantage can add upquotTo get an idea of the returns providers expect to see when they invest in speed Hibernia Atlantic is building a 300 million transAtlantic cable to cut data transmission 6 milliseconds compared to archcompetitor Global Crossing Spread Networks just linked Chicago to New Jersey with a highspeed connection And if anyone figures out how to bore straight through the Earth you can be sure they39ll have customersEyebrows are raised particularly when exchanges themselves sell lowlatency links Nasdaq39s colocation business has been under regulatory scrutiny since 2009 and the NYSE is seeking special permission from the SEC to sell more coloOthers can39t help wondering if this game is rigged Are some competitors being kept away from fast links And do some others get a crossconnect a few feet shorter and few slices of a second faster in even the best locationsMany of these complaints are spurious but can39t be totally dismissed Markets thrive on confidence and transparency and when people suspect cheating they stop playingThe blame game is not reserved to unsuccessful players Complaints erupted after 201039s quotFlash Crashquot when the Dow Jones Industrial Average plunged more than 600 points in 5 minutes and then magically bounced back 20 minutes laterHighfrequency traders did have a role in the crash but analysts have said they were not at fault there or in similar eventsSome believe high frequency trading unfairly advantages a privileged few Others complain that it disrupts conventional trading And though it creates undeniable efficiencies it also creates undeniable perceptions of impropriety which may outweigh benefitsWhat NowDespite calls for more regulation these networks are moving forward evolving quickly Already more than 60 percent of US financial trading and a third of European trading filters through an HFT platform With physical laws doing what man39s laws cannot in limiting speeds some believe current concerns will soon go awayquotUnless we change the laws of physics the highfrequencylowlatency game has played outquot writes Larry Tabb of the Tabb Group research firm Tabb says we ask the wrong question in wondering whether high frequency trading is bad for the market It39s already been transformed with more to comequotWe have seen a 2000fold drop in average coretrading latency in the last three years and I think the move to measure trading latency in picoseconds is nearingquot says Christian Sommer Intel39s director of capital marketsIt may be that the need for speed will simply hit a wall Even measuring latency in picoseconds requires such sophisticated tools that it practically requires a CERN physicist After all a picosecond is to one second as one second is to 31700 yearsquotLight travels 30 centimeters in one nanosecondquot says Neil McGovern Sybase39s senior director of strategy and financial services quotSo if light can go only a few centimeters in a picosecond how much faster are you going to getquotIn which case markets will have to look elsewhere for competitive advantages like being smarter High frequency lowlatency architectures will just be tools for executing a strong alphaseeking strategyquotThe truth is that if you really have the talent on board smart enough to achieve true ultralow latencyquot says Ocheret quotthen you are probably smart enough to make money without itquotAs CEO of RampRate Sourcing Advisors and DeepStrat Tony Greenberg has been an idea generator transforming perceptions and industries since he was 17 Under Greenberg39s leadership for more than a decade RampRate has radically changed how IT services are purchased creating actionable datadriven sourcing information that has saved tens of millions of dollars and thousands of hours of headaches for major clients in entertainment Internet services finance media and video games DeepStrat a spinoff from RampRate39s strategic research arm focuses on growthadvisory services for companies in the digital media value chain particularly in mergers ampamp acquisitions rampups and funding plansRead all Tony39s MediaBizBloggers commentaries at Only Time Buys TrustCheck us out on Facebook at MediaBizBloggerscomFollow our Twitter updates MediaBizBloggerThe opinions and points of view expressed in this commentary are exclusively the views of the author and do not necessarily represent the views of MediaBizBloggerscom management or associated bloggers MediaBizBloggers is an open thought leadership platform and readers may share their comments and opinions in response to all commentaries

Become a Thought Leader.
Share your thought leadership article with industry professionals & have them archived in Thought Leadership

Business At The Speed Of Light - What is Millisecond Worth? - Tony Greenberg

Author

Publish date

Channel

Archived in

Tony Greenberg

"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

More Videos:

Become a Thought Leader. Share your thought leadership article with industry professionals & have them archived in Thought Leadership

Business At The Speed Of Light - What is Millisecond Worth? - Tony Greenberg

Enjoying This Commentary? There's More to Love

Tony Greenberg

"About That with Carl Mayer:" Alaina Donnellon (Episode 10: Political Spending) - By Carl Mayer

The payment was successful

Cookies

Become a Thought Leader.
Share your thought leadership article with industry professionals & have them archived in Thought Leadership