The Power Express hopes that traveling through the shallower water will help create a shorter distance and cut time. Yet, the shallower waters are more susceptible to damage. I know that Hibernia Atlantic is taking measures to avoid any damage, but I am curious as to how protected the cable will be and whether or not it will be able to withstand the potential threats. When I began reading this article, I was surprised that Hibernia Atlantic would spend so much money in order to reduce the speed by 5 milliseconds. It seems outrageous that so much effort would be put in to making such a little difference. The article explained how strategic and tedious the planning for the route was for Hibernia Atlantic. Yet, as I continued to read the article it mentioned why firms would appreciate the decrease in time. According to the article, “…the incessant desire to sift through stock and bonds pricing data at ever-more blistering speeds has high-frequency trading firms willing to pay millions for access to new or upgraded fiber-optic communications networks”(businessweek.com). I found this significant because it demonstrates just how important data travel is to some companies. It shows how the firms value the speed at which they can receive and send data. However, I am curious to see how much longer the competition of being the fastest trans-Atlantic cable can last. It seems that there is not much else to be done in order to make the distance across the Atlantic shorter. For example, the article explained, “… through continuous improvements AC-1 will maintain its market position by the time Project Express opens”(businessweek.com). I am curious to see what will happen when Project Express does open and how it stands up against its expectations, as well as AC-1.
In addition, I was interested to learn from this article about the point of view from Manoj Narang. Narang owns the company, Tradeworx, also in the industry of data travel. He stated that, “All they’ve done is impose a gigantic tax on the industry and catalyze a new arms race” (businessweek.com). I think he brings up a good point because the high cost to accessing Project Express excludes so many firms. However, I suppose that is the intention of Hibernia Atlantic, in order to make their cable the most desired one. Project Express will open in 2013, and I am excited to see the outcome of all the planning and money that went into this project. I am also looking forward to what other companies might try to do in order to be the fastest transatlantic cable.
Sources:
http://www.businessweek.com/articles/2012-03-29/trading-at-the-speed-of-light
I have heard before that “Time is money”, but 5 milliseconds seems a bit absurd. At least, that was my initial thought after reading this article. However, as I thought about it, this could really end up paying off for companies in the long run. What I kept thinking about while I was reading this article was the Efficient Market Hypothesis we have learned about in Dr. Krahel’s class. What his hypothesis states is that it is impossible for investors to "beat the market” because the existing share prices already reflect all relevant information. However, this does not account for the minor discrepancies in time that can arise due to a new cable being put in.
ReplyDeleteAgain, 5 milliseconds are not a lot, so how could this possible effect all relevant information being shared on the stock market? Well, the article mentions how speed is measured in trading, and it is measured according to latency. Latency is how long it takes a trade to happen from the time it is started to the time that it is executed. If a trade occurring is big enough, then the 5 milliseconds that this new cable will save can add up to be a few seconds by the time it is complete. This could make a world of a difference in regards to stock trading. All someone needs to do is be able to see a minute in the future, and they could be a billionaire. While this is not really seeing in the future and not even close to being a minute, this can make a huge difference in how much these companies are able to trade.
While this article mentions the threat this cable faces, I feel that this investment could be worth the risk. Even though it is in shallow water, these high-frequency trading companies feel that this cable can really bring them in a lot of money. Investments aren’t made if they don’t pay off in the end, so they must see these quicker times adding to their assets. Likewise, there is no saying whether or not these cables in shallow waters will even be that much of a risk. The article mentions that typically fiber optic cables are built to avoid shallow water just out of a precaution, but those wires are typically much larger. The small cables used for this project could prove to be very efficient and not as risky as everyone thinks, thus really paying off in the end.