In the relentless quest to speed up stock trades, space may be the final frontier.
Today, high-frequency traders use microwaves, lasers and advanced kinds of fiber-optic cable to shave fractions of a second off the time it takes to execute trades. It’s a business that depends heavily on the ability to transmit data as quickly as possible between financial centers. Price moves in key markets drive fluctuations in other markets, and HFT firms must race from one exchange to another to adjust their trading activity in light of the latest data. Otherwise, they risk losing money to faster HFT firms with fresher information.
Satellite networks orbiting a few hundred miles above the Earth’s surface could represent the next technological leap forward. Starlink, deployed by Elon Musk’s Space Exploration Technologies Corp., has already launched more than 1,000 satellites. Amazon.com Inc., OneWeb Global Ltd. and Telesat Canada are building rival networks set to go live in the coming years. And a U.K. space entrepreneur is planning a network that would cater to the high-frequency trading crowd.
The satellites in such constellations would orbit the Earth far closer than older generations of telecommunications satellites. They are also smaller and cheaper to launch. This makes it possible to deploy networks of hundreds or thousands of satellites, in which at least one satellite is always nearby, no matter where on the planet you are, even as the satellites whiz by at thousands of miles an hour. The more advanced projects plan to use laser links between satellites to create speedy data networks covering the globe. With such a network, a Chicago trader could beam U.S. futures prices to a satellite overhead, which would relay them over a chain of several satellites, then down to London. Such space-based connections could be faster than existing networks on Earth.
That has the potential to change the way that high-frequency traders send data between exchanges in North America, Europe and Asia.