#80: Bizarre Swamp Triangle
If you're new to this newsletter from The Prepared, (1) welcome! and (2) I don't always write about high-frequency trading, but am coincidentally writing about it twice this week thanks to this Financial Times article (paywall, sorry), which has some fascinating updates on a practice that was already pretty high-frequency ten years ago: Trades that took microseconds in 2011 are down to nanoseconds now, approaching literal light speed. Operating at the limits of possibility forces HFTs to acknowledge the physicality of information, a quality the rest of us have the luxury of forgetting when we send emails or check Instagram. "Data sent down fibre-optic cables can move extremely fast over long distances (across the Atlantic, say)—but only if those cables are straight; naturally, when light hits the side of the cable, it takes longer to arrive." The stakes just aren't as high when the data from your iMessage bounces off the side of a cable on the way to the group chat. Shortwave radio, satellites, and television frequencies are all being tested in the service of shaving additional nanoseconds off of trades.
HFTs are thus shaping the built environment, but with a subtlety in contrast to their grandiose mechanics. When information itself is physical and every nanosecond matters, the locations of the servers, towers, and dishes themselves become as critical as the placement of Amazon's fulfillment centers, if not more so. But unlike the significant infrastructure of the past—bridges, railroad terminals, or seaports—this is a post-human infrastructure that benefits from being in nondescript places like "the muddy fields of a Chicago suburb," the Belgian High Fens, or the New Jersey Equity Triangle between Mahwah, Carteret, and Secaucus, the respective locations of the matching engines for NYSE, Nasdaq, and BATS/Direct Edge. If Grand Central Station or the original New York Stock Exchange needed to be in Manhattan because that's where people were, today's most consequential infrastructure needs to be in marshy exurban areas because that's where other computers are. Even airports locate as far as possible from the cities they serve because human settlements interfere with their operations, despite being the reasons for their existence.
The Financial Times article expresses alarm at the illegibility of both the processes and the physical infrastructure that underpin contemporary finance. Not only is much of it too complex for the average person to understand, it's also basically invisible. That outcome is unavoidable, though, as technology gets smaller, faster, and less dependent on human operators: Shipping containerization replaced labor-intensive docks on urban waterfronts (in places like Brooklyn) with much larger facilities in more remote locations (like Elizabeth, New Jersey), freeing up those urban waterfronts to become parks and entertainment zones. The New York Stock Exchange has undergone a similar transition. Matt Levine writes, "The real purpose of the Corinthian columns and the trading floor and the traders in their jackets is mostly to create a simulacrum of a stock exchange that is legible to humans watching stock-market shows on TV." Contemporary cities are surprisingly adept at simulating purposes they no longer serve, comforting us as the real action moves out to New Jersey where we can no longer see it.
Reads:
Video game architecture and the real, often impossible-to-build, architecture that has influenced it.
Joanne McNeil on Google Street View and how humans are links in the chain that produces it rather than just the end users (also, discussion of the theory that Leonard Cohen is visible on Street View).
The story behind the incredibly eerie photo of a guy standing next to the radioactive "Elephant's Foot" in post-meltdown Chernobyl. Amazingly, the guy is probably still alive.