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People spend a lot of money to send financial data faster and faster.

The US Postal Service launched its New York to Chicago service in September 1919 but it was often interrupted by bad weather and so letters continued to go by rail. In 1925 a group of Chicago bankers petition for a more reliable service on the grounds that if they could fly checks overnight between Chicago and New York instead of sending them by rail then they would clear a day sooner giving the banks quicker access to the money. They were quite prepared to pay a premium for such a service.

The solution seems to me astonishing, but it happened. As Hiawatha Bray explains in his excellent book on the history of navigation, “You Are Here“, the Post Office was building a series of 50 foot tall towers, three miles apart, to provide gas-powered flames capable of guiding planes over long distances. So they built a series of towers all the way between Chicago and New York and the mail could be carried overnight and the banks cheerfully (well, I’ve no idea whether they were cheerful or not) paid a premium in the region of four times the rate the standard mail. That Chicago-New York route continues to drive innovation today.

No wonder that Spread Networks, the company building the fibre-optic connection, proudly boasted: “Round-trip travel time from Chicago to New Jersey has been cut to 13 milliseconds.”

And HFTs were willing to pay through the nose to use it, with the first 200 to sign up forking out $2.8bn between them.

[From High-frequency trading: when milliseconds mean millions – Yahoo Finance UK]

That was then. This is now and, because as you can imagine, 13 milliseconds is to just far too long for data to get between the major financial markets in Chicago and New York, money is driving further development.

One new hot market for microwave providers is between New York and Chicago, both cities with many financial services firms… Based on the speed of light, the theoretical limit for sending information between New York and Chicago is 7.96 milliseconds. Right now, the state-of-the-art among microwave service providers is about 8.5 milliseconds,

[From Microwave vies with fiber for high-frequency trading – Computerworld]

So, right now, folk are investing in communication links that will cut 4.5 milliseconds from the time it takes to send information between the markets. Pathetic! There’s still a further 540 nanoseconds to go, you sluggards! A lot can happen in 540 nanoseconds! The speed of modern communications is astonishing. You can send financial services data at almost the speed of light. Incredible. Meanwhile…

We just need Amazon’s bank to send money electronically to a checking account at Chase bank. It’s just information traveling over wires. How long could it take: A minute? An hour? It took five days.

[From Episode 489: The Invisible Plumbing Of Our Economy : Planet Money : NPR]

That’s longer than it took to send money between Chicago and New York in 1925, before the airmail service launched. Hhhhmmm…

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