Chicago’s High Frequency Trading War Rages As Yet Another Microwave Tower Pops Up
The ongoing high-frequency-trading-tower-war that we reported on about a month ago has turned the page onto its next chapter, according to Bloomberg. Aurora, Illinois is one of the closest places that high frequency traders can get to the $63 billion CME Group exchange, where futures and derivatives on commodities and US treasuries trade, making it a mecca for HFTs seeking to frontrun slower orderflow.
We reported last month about an ongoing fight between two companies in Illinois to get their towers the closest to the CME Group in order to shave milliseconds off their transaction times – and to be able to sell space on their towers to other tenants looking to get as close as possible to the exchange. The latest move in that competition has come from Scientel Solutions LLC, who has assembled a 195 foot tower across the street from CyrusOne Inc, allegedly obstructing CyrusOne’s tower.
When we last reported, Scientel’s development site was only 2.6 mostly vacant acres that housed only a trailer, a portable toilet, and a pile of metal poles. That has changed, and Scientel’s tower is now up and running.
CyrusOne said previously that Scientel’s tower would block its own “line of sight” to downstream microwave dishes from its already existing tower, and interfere with its communication to and from the CME data center.
CyrusOne Inc. had previously tried to stop the Scientel tower from happening in January 2018 by suing Scientel and the city of Aurora, Illinois, which had approved the project. CyrusOne’s tower went up last year and sits just feet from the data center that
houses CME Group Inc.’s derivatives exchange.
The point of CyrusOne’s tower, to begin with, was to end the “war” and put all players seeking access to the CME Group in the same position – literally and figuratively. CyrusOne, which owns the CME Center, decided last year that it would finally end the scramble for real-estate by putting up the 350 foot tall wireless tower that would allow anybody to rent space on it. It’s closer than any trading firm could get to the center and targeted putting everybody “on equal footing”… in exchange for a very generous fee to CyrusOne, of course.
Scientel President Nelson Santos told Bloomberg this week that none of the antennas on the Scientel structure are currently being used for trading, but that “will change at some point”. Even better is the fact that the Scientel tower will connect wirelessly to CME by beaming signals to the CyrusOne tower. Santos didn’t disclose his customers due to NDA and what he called “competitive reasons”.
Meanwhile, CyrusOne’s tower has started to bud. Despite being put up last year, it was without an antenna until several weeks ago, when the first antenna was attached. There has been activity on the pole, with people climbing the tower this week and last, indicating that the project is progressing.
FCC records list Jefferson Microwave LLC, New Line Networks LLC and Webline Holdings LLC as three entities that are licensed to operate from the tower. Jefferson is part of Oakland-based McKay Brothers, New Line Networks is a joint venture of Chicago’s Jump Trading LLC and New York-based Virtu Financial Inc. and Webline is DRW Holdings LLC of Chicago.
Actually being a nanosecond faster is just as important, hence all of the fuss: microwave networks rely on line-of-sight transmissions as microwaves need to be able to “see” the dish they are communicating with. Because of the Earth’s curvature, the signal must be relayed from towers that are spaced apart generally every couple of miles. Companies like McKay say that they can process a trade from Aurora to Carteret, location of the Nasdaq data center, or Carteret to Aurora, in 4 milliseconds.
Back in March 2016, when it appeared that HFTs are starting to cannibalize one another, the CME sold its data center building for $131 million. The local government thought it had the issue squared away when it required CyrusOne to lease space to traders on its tower at “fair market rates”. Scientel’s tower popping up seems to be just more proof that government intervention is often useless. In this case, in fact, it looks as though it may have even stoked the fire hotter.