Evolution of Light-Based Technologies and Trading at the Speed of Light

Trading at the Speed of Light

by Anupriya Gupta

The year 2015 was proclaimed as the International Year of Light and Light-based Technologies by the United Nations on the occasion of 150th anniversary of Maxwell’s formulation of his theory of electromagnetism. Around one and a half century ago, Maxwell’s equations initiated a new field of electromagnetism which studies the electromagnetic force and the relationship between electric and magnetic fields and light.

In the past few decades, a substantial amount of research has been done by scientists in the fields of transformation optics and nano-scale fabrication technology to create materials which can increase the speed at which information travels, matching almost the speed of light. Two persons sitting more than 3000 miles apart can get connected in less than a second, an entire movie can be downloaded in less than a minute, and now Google has funded a project ‘Internet at the speed of light’ which challenges research communities to reduce Internet latency. The musicians all around the world are aspiring to jam together on the internet as a part of the project!

By far, the fastest data transfer application has been seen in the field of high frequency trading where every millisecond of delay can affect the profits a trader can make. To cater to the needs of the securities market, the telecom industry is providing cutting-edge technological solutions. Recently, a Canadian firm has made plans to lay fiber optic cables across Arctic to bring the two of the world’s financial centers in Asia (Tokyo) and Europe (London) closer by a few milliseconds!

In the trading world, information is money. Ever since 1800s, when pigeons were the information carriers, there has been a rush to get information faster. Currently, glass optical fibers are used widely which allows information to travel in vacuum at two-thirds of the speed of light. This speed can be increased if information travels through the air. The engineers are experimenting with lasers, hollow-core fiber cables which allow light to travel through air gaps, unmanned solar-powered drones carrying signal repeaters to allow faster trading signals to travel across continents. With the advancement in technology and change in markets, the high frequency trading firms in the developed economies are also taking over the volumes at a considerable rate!

It is no doubt that in the coming years, the global financial system will be largely influenced by the technology backed hedge funds and trading companies. The change in dynamics of the markets need to be understood carefully by computer scientists, mathematicians, physicists, and economists and their research needs to be used by market regulators and risk managers to boost the economic investment.

QuantInsti, the pioneer Institute in Asia, aims to provide the much-needed knowledge to fill the gap between research and implementation of technological advancements in financial markets.