A "Mysterious Antenna" Emerges In An Empty Chicago Field; Billions Depend On It

Tyler Durden's picture

Readers are familiar with the various microwave and laser arrays located at the real New York Stock Exchange in Mahwah, New Jersey, both of which we have written about in the past.

Microwave tower located next to the NYSE in Mahwah, NJ.

This article, however, is not about the familiar antennas off Route 17 in New Jersey. Instead, demonstrating to what lengths the high frequency traders will go for just a few millisecond advantage - which in the HFT world makes all the difference between billions in profits and losses - Bloomberg reports that a mysterious antenna has emerged in an empty field in Aurora, near Chicago, and a trading fortune depends on it.

Strange? Of course: as BBG's Brian Louis admits "it was an odd transaction from the outset: $14 million, double the going rate, for a 31-acre plot of flat, undeveloped land just west of Chicago. In the nine months since, the curious use of the space has only added to the intrigue. A single, nondescript pole with two antennas was erected by a row of shrubs. Some supporting equipment was rolled in. That’s it."

As it turns out, those antennas - as readers may imagine - were anything but ordinary. Same goes for the buyer of the property: anything but your typical land investor, although the name will be all too familiar to those who have followed our reporting on HFT over the years: it was Jump Trading LLC, "a legendary and secretive trading firm that’s a major player in some of the most important financial markets."


Equipment on land purchased by an affiliate of Jump Trading

Jump Trading affiliate World Class Wireless purchased the 31-acre lot for $14 million, according to county records. “They paid probably twice as much as it’s worth,” said David Friedlandof Cushman & Wakefield. “I don’t see anyone else paying close to that price.”

There was a reason why Jump overpaid so much: it was an investment into guaranteed future returns.

Because ultimately the purchase was all about the location: just across the street lies the data center for CME Group, the world’s biggest futures exchange. By placing its antennas so close to CME’s servers, Jump hopes to shave maybe a microsecond off its reaction time, enough to separate a winning from a losing bid in trading that takes place at almost the speed of light. Enough to make billions in profits if done successfully millions of times every minute for year.

As Bloomberg describes the land grab, "it was the latest, and perhaps boldest, salvo in an escalating war that’s being waged to stay competitive in the high-speed trading business."

The war is one of proximity -- to see who can get data in and out of CME the quickest. A company called McKay Brothers LLC recently won approval to build the tallest microwave tower in the area while another, Webline Holdings LLC, has installed microwave dishes on a utility pole just outside the data center.

“It tells you how valuable being just a little bit faster is,” said Michael Goldstein, a finance professor at Babson College in Babson Park, Massachusetts. “People say seconds matter. This is microseconds matter.”

It also tells you something else: at its core, modern trading is simply about being faster than your competition: no thinking goes into the trade, only reaction times matter. That, and frontrunning your competition. Some more details about this literal land grab:

In October 2015, McKay Brothers, a company that sells access to its microwave network to high-speed traders, leased land diagonal to the CME data center, under the name Pierce Broadband LLC, according to DuPage County property records.

 

Last month, the county gave McKay approval to erect a 350-foot high microwave tower that could be 600 feet closer to the data center than its current location, records show. Two trading firms, IMC BV and Tower Research Capital LLC, own minority stakes in McKay. Co-founder Stephane Tyc said his firm may never build the tower but it would be part of the firm’s continual efforts to speed transmission time.

 

Then there’s Webline Holdings. In November 2015, it was granted a license to operate microwave equipment on a utility pole just outside the data center, according to Federal Communications Commission records. Webline has licenses for a microwave network stretching from Aurora to Carteret, New Jersey, where Nasdaq Inc.’s data center is located. Messages left for Webline were not returned.

Back to the mysterious antenna: according to Bloomberg, the license for the transmission dishes is held by a joint venture between World Class and a unit of KCG Holdings, another HFT trading firm that was recently acquired by Virtu Financial. In other words, the "who is who" of HFT has been unleashed on an empty field near Chicago, and to the builder will go the spoils.

It could be billions in revenues.

* * *

After all this frentic building of microwave tower, who is closest to the CME servers? It is unclear. Trading data first leaves CME computers via fiber cable, and then to nearby antennas that send it by microwave to other towers until it reaches New Jersey, where all the major U.S. stock exchanges house their computers. The moves in Aurora are intended to reduce the time that the data is conveyed through cable; the practical impact is shaving off a millisecond or maybe even a few nanoseconds.

At its core, the race is about latency arbitrage, and not being the slowest firm on the block - a recipe for financial ruin. Sending data back and forth between the U.S. Midwest and East Coast allows high-frequency traders to profit from price differences for related assets, including S&P 500 Index futures in Illinois and stock prices in New Jersey. Those arbitrage opportunities often last only tiny fractions of a second.

Ironically, all the land grab and overpriced land purchases could be made obsolete with one simple decision: a microwave tower could be installed on the roof of the CME data center to eliminate the need for jockeying around the site, the same way the NYSE has a microwave tower next to its NJ headquarters. The exchange is indeed looking at allowing roof access, along with CyrusOne, the company that bought the data center last year, CME said in a statement. Traders being traders, however, they may continue to battle, this time for the most advantageous position on the microwave tower itself.

“We are confident the CME can provide an alternate and better solution which offers a level playing field to all participants," said McKay’s Tyc.

Which is ironic because at its core, modern High Frequency Trade is about everything but a level playing field: after all there are millions of traders to be frontrun, take that away, and the HFT parasites of the world have no advantage whatsoever.

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markovchainey's picture

How do you feed that thing fake data? 

Boris Alatovkrap's picture

Russia is already hack antenna for free wifi!

johngaltfla's picture

I've heard rumors that this is also backed up with experiminetal 6G tech. If true, it could destroy the cable companies in 5 years because why would anyone need hard wired TV/Internet/Satellite when you can get 100-500MB data streams via airborne transmission. This is a smart move to test this if it works because it provides the tech to eradicate all of the conventional thinking for hard wired media before 2025.

cossack55's picture

Super. One can watch all that TV while receiving their Chemo and radiation.  

J S Bach's picture

"Trading" & "Speculation".  Two of the most wholesome, productive and moral occupations known to man.  Where would our world be without them?

boattrash's picture

"31 acre flat plot of land".

One man + one rifle = A great lesson taught in wasted $$

Fish Gone Bad's picture

I wonder what tethered mylar balloons carrying long tails of aluminum would do?

Manthong's picture

or a big air cannon with aluminum chaff confetti size cut to various wavelengths (.05 to .33 meters maybe?).

Carmagnole's picture

a kite
with a shiny tail

Rich Stoehner's picture

Why mess with air born balloons and kites, looks like you could just walk up and wreck the thing.

Manthong's picture

OK OK, yeah, I got it

Determine the line of sight between that pole and the CME pole and/or their proprietary relay…

..place a continuous very high pressure air source and siphon feed the aluminum confetti size cut to various wavelengths to create a fountain of  chaff.

Print or emboss “F your HFT” on the larger, lower wavelength pieces.

..although a bulldozer would be more efficient.

 

imaginalis's picture

Do they have an algorithm to pay the ransomware off quicker than everyone else?

Korogaro's picture

That antenna isn't very tall. Maybe just a strategically parked truck and trailer.

glenlloyd's picture

At some point that thing is going to get ruined, either intentionally like what Manthong suggests or by boozing kids walking by in the middle of the night ready to vandalize something.

It would be very funny if that tower went down at a very inopportune time...

I would just feel so bad if that happened...

/sarc

Mr 9x19's picture

i would go shoot the antenna just for the fun

AltRight Girl's picture

Th echicago nignogs won't waste much in going there looking for some copper cable to appropriate.

I mean trade.

847328_3527's picture

I count on CNN for all my Fake News these days.

 

CNN is the trusted source of Fake News!

HRClinton's picture

It may become an HFT of a different kind: 

High Frequency Target 

For rifle enthusiasts. 

white horse's picture

Trading is one of two oldest professions fyi. Only communists were stupid enough not to realize this.

El Oregonian's picture

Makes for a long day when you live it just one Millionth of a second at a time. As for me, I take it one breath at a time... Nothing beyond that is quite frankly, guaranteed.

boattrash's picture

See above; 2,000 fps would trump their nano-second...

GUS100CORRINA's picture

Be interesting to see what is underneath the land using GPR. Probably some vast network of underground bunkers and tunnels specially prepared for the elite and high ranking government officials. 

Ground-penetrating radar (GPR) is a geophysical method that uses radar pulses to image the subsurface. This nondestructive method uses electromagnetic radiation in the microwave band (UHF/VHF frequencies) of the radio spectrum, and detects the reflected signals from subsurface structures. GPR can have applications in a variety of media, including rock, soil, ice, fresh water, pavements and structures. In the right conditions, practitioners can use GPR to detect subsurface objects, changes in material properties, and voids and cracks.

Scuba Steve's picture

So was Jefferson and Jackson ...

and everyone knows it.

Idaho potato head's picture

Not to mention your nervous system and reproductive capacity.

EddieLomax's picture

I severely doubt it uses any form of mobile technology, 4G already has a massive amount of latency compared to 2G and isn't all that good for online gaming where ms's matter let alone when us matter.

BidnessMan's picture

Waving a tin foil hat on a selfie stick in front of one of those antennas could be interesting.  

. . . _ _ _ . . .'s picture

@ Boris: "Russia is already hack antenna for free wifi!"

Proof.

City_Of_Champyinz's picture

Jesus H fucking Christ this shit stinks to high heaven.

Sudden Debt's picture

Just drive a truck into it during the FED minutes and suddenly you've got a stock armegedon!

Wouldn't that be the biggest terrorist attack ever :)

And all they need to do is drive that truck against an ungarded pole in the middle of nowhere with a very easy way out.

And you could off course speculate against it and get filthy rich in the process.

Just saying... 

A few sticks of dynamite to remove treetrunks will also do... that would cost you about 200 bucks 

Or a fequency jammer that they use in movie theaters to block signals... but those cost about 1500 bucks

Wouldn't that be fun :)

Valuator's picture

How long until leftists destroy it?

LithiumWarsWAKEUP's picture

...big Bids a couple off the Asking price. lol

BurningFuld's picture

Someone in Chicago got a drone they could crash into it?

EddieLomax's picture

I'd love to see some kids play with this thing using just a couple of air rifles, one hit on the wrong bit and the firm loses millions.

Peterman333's picture

Ha! kids are kids everywhere. Mybuddy related a story to me where he had a power transformer outside his second story bedroom window at his hme growing up an dhe would use it for target practice with his air rifle, getting a nice "plink" when he was on target.

GoinFawr's picture

Uh 'The Fly' called, he wants his contribution back.

The slightest breath of Tobin Tax and HFT's all go the way of the dinosaurs, while genuine liquidity returns.

TeethVillage88s's picture

There is no "...31-acre plot of flat, undeveloped land just west of Chicago..."

I've been there.

You are probably talking about farm country much further West...BTW "West" is Capitalized.

RAT005's picture

West of Chicago is kind of the definition of flat. I use to live about 15 miles from there.

See how I put west first so I don't have to decide whether it gets capitalized ;-)

Donald J. Trump's picture

East of Chicago is pretty flat too.

GrokMarkets's picture

It is capitalized if you are talking about a place, like "My family lives out West". But it isn't required when just talking about a direction like "I drove west from Chicago".

Not My Real Name's picture

"BTW "West" is Capitalized."

No, it isn't. And neither is "Capitalized."

The only thing worse than a pedant is a pedant who doesn't know what he's talking about.