Shortwave Trading | Part I | The West Chicago Tower Mystery
Since 2014 this blog has extensively covered the wireless networks built by high-frequency trading (HFT) firms or network providers to reduce latencies between the different exchanges around the world (market makers need fast connectivity to manage risk, news traders also need to be fast, etc.). This epic investigation on microwave, which started with HFT in my backyard, will be fully reported in a book I’m currently writing (in French for now). As I’m quite busy with this writing (and other/more interesting matters about market structure), I didn’t really have the time to check out what I have been hearing about “shortwave” or “high frequency” radio. This is the way high-frequency trading firms may use shortwave radio to directly connect widely-separated locations (in short, traders are willing to use shortwave to cross oceans with less latency than any fiber – like Hibernia).I’m Bob Van Valzah and I’m on a “gardening leave” between jobs working as a Performance Engineer for high-frequency trading firms in Chicago. I recently stumbled onto the first evidence of shortwave trading at a site in West Chicago, Illinois and then used Federal Communications Commission (FCC) database research techniques pioneered by the owner of this blog to find two more sites. My non-disclosure agreements with employers would typically prevent me from talking about this, but my trading-related discoveries are my own while on gardening leave. The results of my research may be of interest here and there, so I offered to do some guest posting on this blog. I’ll have to go quiet again in July when I head back to work.
But recently I got more intel about the situation (and some fun anecdotes). With some help from the US, I found that a firm purchased a field for more than 1$M to build towers and antennas; with some help from the EU, I got hints about Germany; and I dug into UK public records. I even met, last March in Amsterdam, people involved in those projects. Not surprisingly, at least five HFT/market making firms showed up behind the shell companies/names they use to hide. The usual suspects. Above all, I have been contacted recently by someone from Chicago, Bob, who decided to investigate the “shortwave” networks in his backyard. Today I’m pleased to host Bob as a new guest writer on this blog. This first part of the “Shortwave Trading” series is released at the same time Bob is talking about what he found at the STAC Summit in Chicago. Next parts will follow soon.
It might be reasonable to assume that “West Chicago” was just a western part of Chicago, Illinois. In fact, it’s a city in its own right, twenty some miles west of the big city. A typical weekend will find me cycling down a bike path that runs nearby. In March, muddy path conditions caused me to detour through an industrial park in West Chicago where the West Chicago Tower Mystery began. I looked up from the handlebars and saw this tower.
I’m an amateur radio operator, or “ham,” (KE9YQ) and those four big antennas look a lot like ones that a ham would use to talk across an ocean. I’ll just call them shortwave antennas here, but practitioners of aluminum feng shui (antenna design) will recognize them as log periodic. There’s also a microwave dish antenna between the top two shortwave antennas. This much I could tell just by looking.
Most of the radio towers you see each day are cell towers. There are 215,000 of them in the US. They differ from other radio towers in that they will almost always have one ore more triangular structures with three or more directional antennas on each side of the triangle. A grid of cell towers covers an area with roughly hexagonal cells so that you get a good signal everywhere.
The West Chicago tower had no triangular structure, so I was pretty sure it wasn’t a cell tower. And these antennas were huge compared to regular cell tower antennas. I could literally see them 1/2 mile away. Some cell towers do have microwave dish antennas when it’s hard to bring fiber to a site, but shortwave antennas didn’t seem to go together with microwave in my mind.
Mystery #1: If this wasn’t a cell tower, what was it?
With my curiosity up, I pedaled to the base of the tower and took a look around. Like all cell towers, there’s a barbed wire perimeter fence and I could see a power meter where electricity enters the site. The panel allowed for up to four power meters because it’s common for two or more carriers to share a single site. There’s also a master power switch for each carrier so that they can shut off their juice for maintenance without knocking the other carriers off the air....MORE