
Shortwave Trading: The West Chicago Tower Mystery - TheAlchemist
https://sniperinmahwah.wordpress.com/2018/05/07/shortwave-trading-part-i-the-west-chicago-tower-mystery/
======
johnohara
> _It showed a direct link between the West Chicago tower and another tower
> right by the Chicago Mercantile Exchange!_

It's pointing at the top of 10 South Canal, one of downtown Chicago's main
tombstones for data communications. The building has 3-6 foot concrete walls,
no windows for the first 23 stories and was reportedly designed to withstand
an overhead nuclear blast. The standing joke used to be that if Chicago were
nuked you'd still get a phone bill because of that place.

There's a lot of underground fiber in that area too. Including 24-count
bundles mounted near the ceiling of the old underground tunnel delivery system
-- the one that accidentally flooded during the 90's. They were installed by
Metropolitan Cable back in the late eighties/early nineties during the
"politically connected" fiber gold rush to replace dedicated copper with
light.

It would not be speculation to think there's fiber running directly from the
MERC to 10 South Canal or that the MERC's location near 10 South is a
coincidence.

The line-of-sight out to Aurora is interesting too. There are high spots out
there with tower clusters reminiscent of East Texas in the 1930's. I believe
there are backup trading centers out there as well built after 9/11.

~~~
retzkek
The map shows he meant the CME Group's data center in Aurora:
[http://www.cmegroup.com/trading/colocation/co-location-
servi...](http://www.cmegroup.com/trading/colocation/co-location-
services.html)

~~~
johnohara
The other thing to note is the proximity of the BNSF rail line. There are two
4-inch continuous PVC pipes next to the track, each with a gel-sealing
24-count fiber bundle inside. They run from downtown Chicago to Hinsdale to
Aurora and beyond. They were installed about a year before Bershire-Hathaway
purchased them.

------
discussedbefore
The secret world of microwave networks
[https://news.ycombinator.com/item?id=12862789](https://news.ycombinator.com/item?id=12862789)
(2016)

HFT in My Backyard
[https://news.ycombinator.com/item?id=8354278](https://news.ycombinator.com/item?id=8354278)
(2014)

~~~
aoki
i am not sure i would agree that this has been discussed before. this is not
simply about use of RF (microwave, mmwave) for HFT. as i understand it, that
kind of thing typically involves COTS radios and conventional dish antennas.

this instance appears to involve longer-range links and SDRs (in this case,
the ettus USRPs).

~~~
bobvan13
Yes, well said. I think you're making an important distinction. Shortwave is
old technology, but combined with SDR, this is a novel application of it
AFAIK.

------
lettergram
Interesting... I actually know someone working on a project similar to this
(who works at an HFT firm) - if not actually this.

His team was simulating and testing how various weather conditions could
affect trade placement times. For instance, does a high-pressure system, a
heat wave, a blizzard, etc. impact the trade placement times, if so how does
that impact the algorithms.

He works out of Chicago and I've heard of similar things before, so this isn't
unknown to people in the area.

------
sniperinmahwah
Some fun comments here, thanks! For all those who doubt, here are some public
documents (to be detailed on the blog soon) about antennas in UK, filed by a
well-known "HFT" firm: [https://publicaccess.southbucks.gov.uk/online-
applications/a...](https://publicaccess.southbucks.gov.uk/online-
applications/applicationDetails.do?activeTab=summary&keyVal=P5UGGCOHFL500)

------
social_quotient
If this article was an intro to a fiction novel, I’d be interested in reading
the entire thing. Some sort of HFT heist with a good mix of factual
engineering and finance.

~~~
yangcanvas
Rougue Code by Mark Russinovich was a novel I enjoyed about a HFT heist.

~~~
Ftuuky
Can I read it without reading the first two books?

~~~
bobvan13
Yup, it stands alone well. I give it a strong recommendation for accuracy and
storytelling.

------
sailfast
This is a wonderful article for so many reasons. Outlines resources for doing
this yourself, uses industry knowledge to outline hypotheses and then tests
them with data, and reveals a really interesting possibility for market
communication. Also, a bit of local Chicago geography :) An enjoyable read!

Edit: the “is this a troll” comment makes this even more enjoyable for some
reason. Now it’s an even bigger treasure hunt.

------
tomfanning
Would love to know what licensing regime / category they are using for this.
It definitely isn't ham, because that's non-commercial only. The fact that log
period antennas are in use is interesting too - low gain but directional and
useful across a broad frequency range - maybe some spread spectrum technology?

~~~
Jommi
[https://apps.fcc.gov/els/GetAtt.html?id=205708&x=](https://apps.fcc.gov/els/GetAtt.html?id=205708&x=)

~~~
Animats
That one, WI2XER, has been heard, and seen on a spectrum analyzer.[1] They
send their call sign in Morse code, send various test tones, and send what
look like modem-type signals. 100 KW, so they will have no problem reaching
Europe. Not much bandwidth, though, because they don't have enough spectrum
space. Maybe a few hundred kilobits/second.

As a way to get info from markets faster, it's limited. You avoid some
switching and path delays, but the data rate is slow, so it's only faster for
short messages.

[1] [http://i56578-swl.blogspot.com/2018/03/wi2xer-skycast-
experi...](http://i56578-swl.blogspot.com/2018/03/wi2xer-skycast-experimental-
radio.html)

------
a-dub
All along everyone thought that numbers stations were how governments send
messages to their spooks, in reality they were just poor bastards holed up in
tiny shacks manually reading the tape for the S&P e-mini...

------
sandworm101
One has to wonder if this cutthroat competition will ever turn aggressive.
Someone with a SDR and a bit of knowhow could shutdown/jam these systems very
easily. The apparatus is in public view and they don't seem to be guarding
their trash. A well-timed attack on a couple of these towers would create a
few seconds of instability on the markets, enough time for another HFT
platform to take advantage.

A blast from a 1-watt transmitter parked across the street would overwhelm any
signal coming from across an ocean. Try calling the cops about to complain
that your antenna reception is being interfered with. The days of cops hunting
rogue radio stations are long gone.

~~~
jandrese
They wouldn't call the cops, they would call the FCC. If you keep doing it
they will catch you.

------
dx034
I guess low bandwidth is no problem. You only need to send a stream of price
changes of the most common instruments (currencies, stocks). And only if there
are meaningful movements. I guess a few kbit/s can already provide a lot of
value.

How fast would such a connection be? Is there an easy way to calculate the
distance the signal takes compared to great circle line?

~~~
coob
Wouldn't you just send whatever is needed to place the order?

Do all of the processing at the source and just send the final instruction?

(honest question I have no idea how this works)

~~~
dmeeker
Generally speaking, folks use the CME futures as a leading indicator, so you
may have several different trading strategies that trade against the European
markets and just use the CME pricing as one of their inputs. In that case, the
most bandwidth-efficient play is to send your market data over once from
Chicago, replicate it / make it available to all your trading strategies, and
let them do their work locally.

~~~
tomalpha
That might well be true, but if you've only got a few kbits/second of
bandwidth even that might be too much.

~~~
dmeeker
Sure, you're certainly not sending a full feed -- presumably you've got some
algo sitting in Chicago that's looking for interesting / potentially
profitable price / vol changes and sending them via the fast path, while the
remainder of the feed is going via higher-bandwidth but slower paths.

~~~
pbhjpbhj
You might as well have your decision logic before the communication path, then
you can send like buy/sell orders in code using an agreed decryption
pad/dictionary. (Akin to Morse's original conception).

~~~
CamTin
I'm not an algo trader, but you need the data from both ends of the link to
determine if there is a trade you want to make, right? One side or the other
is going to need prices from both ends in order to make a trading decision,
and preferably both, since each side can only make decisions that are relevant
to their side of the link, because needing a round trip negates all of the
speed advantage you incurred by developing a top secret HF trading link.

Edit: I meant the HF here to refer to the "high frequency" wavelengths in use
in the link (in Ham parlance, HF and shortwave are roughly synonymous), but
just realized it also could be "high frequency" as in the frequency of trades.

------
madengr
They are probably also monitoring HF propagation paths, as there can be ground
wave and sky wave, with varying dispersion.

The X300 has some latency too. I’ll be they are doing the majority of
processing directly on the FPGA to avoid SDR latency. The X310 has a larger
FPGA, and would be tell-tale.

Bring on the comms with neutrinos or entangled particles.

~~~
andai
Up next: Tachyon trading

~~~
cameldrv
Maybe not, but almost as exotic:
[https://www.forbes.com/sites/brucedorminey/2012/04/30/neutri...](https://www.forbes.com/sites/brucedorminey/2012/04/30/neutrinos-
to-give-high-frequency-traders-the-millisecond-edge/#6daa4994590c)

While all of the other chumps are trying to bounce their signals around the
surface in fibers or various layers of the atmosphere, you just blast straight
through the earth with (anti)neutrinos!

We live in a weird, weird world, and there's real money behind this idea. It
might even affect the strategic nuclear balance, because submarines are
supposed to be silent and invisible. Their nuclear reactors do generate
extremely large numbers of antineutrinos though...

------
Jommi
Weirdest thing I've read in a long while.

The Author's comments refer to an internet forum thread[0] in German which
discusses a German news article from this April.[1]However, it turns out this
article is an April Fools text.

Just digging deeper into the whole blog you can find something that can only
be described as a fanfiction representation of "Flashboys", but in the context
of this "Shortwave trading".[2]

Is this whole thing a troll? Is this real? What on earth is this?

[0][http://funkbasis.de/viewtopic.php?f=39&t=45900](http://funkbasis.de/viewtopic.php?f=39&t=45900)

[1][https://www.heise.de/newsticker/meldung/Boersenhandel-
besche...](https://www.heise.de/newsticker/meldung/Boersenhandel-beschert-
Kurzwellenfunk-ein-Comeback-4008891.html)

[2][https://sniperinmahwah.wordpress.com/2017/06/26/network-
effe...](https://sniperinmahwah.wordpress.com/2017/06/26/network-effects-part-
ii/)

~~~
Jommi
Seems like it is real: [https://www.six-
group.com/en/home/media/releases/2018/201805...](https://www.six-
group.com/en/home/media/releases/2018/20180503-12H-start.html)

~~~
dx034
This is microwave based. Those lines are well known by now and there are known
routes within Europe (most notable Frankfurt<->London) and the US
(NYC<->Chicago). However, microwave only works over short distances (FRA<->LON
has multiple towers to cover the distance). Crossing the atlantic isn't
possible. Shortwave could deliver a similar speedup over long distances.

I'm a bit sceptical though. Don't the waves have to bounce several times to
get to the target? I'm not sure how much of the ~30% potential speed up vs.
fibre you still get.

~~~
jhpankow
I'd suspect the latency improvement is control over the entire path and not
specifically about the propagation speed/delay.

Getting your data across a long haul undersea fiber requires aggregating it
with everyone else's data at a central point before it gets sent out
optically. This adds latency.

Even with the propagation variability of the wireless path you might be saving
hundreds of nanoseconds.

~~~
bobvan13
There is some latency savings because the radio path is far straighter than
the fiber path, even considering the ricochetting off the ionosphere and the
earth. But the bulk of the latency savings comes from the fact that radio
waves move at the full speed of light while photons through fiber only move at
about 2/3 of that speed. So yeah, it works out to about a 10 ms savings on
shortwave compared to fiber.

------
Ftuuky
From what I understand (and I'm no expert in HFT or electric engineering),
this kind of sub-second trading is done in very specific corridors: Chicago-
NY, NY-London, London-Frankfurt, London-Paris, Paris-Frankfurt. I wonder if
the same applies in Asia, with Singapore, HK, Tokyo, Sidney...

------
jlgaddis
I'm not even remotely involved with the HFT world, but I can't think of any
good reason why they'd want to receive "shortwave" signals from Europe in
Chicago.

Short-haul microwave links for low latency and high bandwidth, yes, but at
shortwave frequencies you are literally talking about _BITS_ per second. TFA
says "Think dialup speeds" but this is lower than even dialup!

They certainly aren't receiving any meaningful amount of data (which I presume
you need for HFT) with that shortwave receiver.

~~~
IndexicalDemon
The crucial information is up and down ticks of the ES-mini futures at the
Chicago Mercantile Exchange. These lead the S&P500 (SPY) index funding in NYC
(by 4 milliseconds), and the ES-mini ticks up and down about once per second.
This few bits of information carries huge value since much of the world's
equity market responds to it. See
[https://arxiv.org/abs/1302.5966](https://arxiv.org/abs/1302.5966)

~~~
mturmon
Great link, thank you. Abstract in case it piques people's interest:

"High frequency trading has led to widespread efforts to reduce information
propagation delays between physically distant exchanges. Using
relativistically correct millisecond-resolution tick data, we document a
3-millisecond decrease in one-way communication time between the Chicago and
New York areas that has occurred from April 27th, 2010 to August 17th, 2012.
We attribute the first segment of this decline to the introduction of a
latency-optimized fiber optic connection in late 2010. A second phase of
latency decrease can be attributed to line-of-sight microwave networks,
operating primarily in the 6-11 GHz region of the spectrum, licensed during
2011 and 2012. Using publicly available information, we estimate these
networks’ latencies and bandwidths. We estimate the total infrastructure and
5-year operations costs associated with these latency improvements to exceed
$500 million."

------
slr555
As a Ham I am certainly intrigued by this posting.

There are a number of obstacles I can see to effectively using shortwave for
financial services. Propagation conditions vary by time of day, solar activity
and other exogenous factors. Another post hypothesized a 100 Kw transmitter
power but even without running the numbers it seems like the FCCs Maximum
Permissible Exposure Limits (MPE) would dictate a larger exclusion zone than
the author encountered, however proper antenna modeling would be needed to be
completely accurate. Another confounding factor to potential efficacy of the
site is the surrounding terrain. The photos show nearby structures and trees
which are less conducive to effective take off angles and propagation
associated with the Yagi type antennas depicted. Most hardcore Ham sites with
big towers have well groomed earth (or even better, water) around them.
Additionally, the data would obviously have be encrypted and transmitted with
extremely robust error correction.

It would be fun to grab a couple of boxes from AOR and see what is coming off
those antennas.

~~~
cameldrv
From the McKay brothers' website: "It's better to be fast 99% of the time than
slow 99.999% of the time" \- Bob Meade and Stéphane Tyč, Co-Founders

If your trading strategy is simply arbitraging Chicago/London, it's probably
ok if your link is even 50% reliable, if for that 50% of the time, it's
significantly faster than your competition's data. London is going to get the
information 10ms later anyhow, so if a packet drops, you can still execute the
offsetting transaction, just at the same time as everyone else.

------
reaperducer
This was covered pretty extensively by Crain's Chicago Business. Some
companies are so obsessed with this sort of thing that they'll pay half a
million dollars to move a receive site across the street. They measure results
in picoseconds. Too much pressure for me.

------
nimbius
Could it possibly be bulk data from sensors?

I worked on a project in several states for IBM that handled traffic shaping
and detection on highways and onramps. This system was used to identify
gridlock and adjust lights at offramps or give people an ETA until theyre
downtown. Most adjacent cities were staunchly NIMBY and didnt care to have the
state government trenching cable to and fro for traffic control, so the data
ended up hopping from town to town on microwave subcontracted from the
cellular company that handled the large electric billboards on the highway.

the benefit of this was also the ability to route signal control data to large
intersections without having to shut them down to dig cable trenches from the
IBM network.

~~~
jlgaddis
Not at the frequencies that those LP antennas are tuned for.

------
dghughes
I recall seeing I think on 60 Minutes HFT that wanted worse latency but I
can't recall why. They have massive spools of fiber optics using them as a
"resistor" (my term) to slow down the transmission.

It seems to be the opposite of this but for the life of me I can't remember
the advantage of doing it.

Found it: [https://www.theatlantic.com/business/archive/2016/06/iex-
app...](https://www.theatlantic.com/business/archive/2016/06/iex-
approved/487898/)

~~~
Ftuuky
I think you're referring to IEX, an exchange that adds a delay with those
spools of fiber optics. According to wiki, "350 microsecond delay adds a
round-trip delay of 0.0007 seconds and is designed to negate the certain speed
advantages utilized by some high-frequency traders".

[https://en.wikipedia.org/wiki/IEX](https://en.wikipedia.org/wiki/IEX) Edit:
didn't saw your edit.

~~~
neomantra
Unrelated to the 60 Minutes piece, but fiber is also spooled at network
aggregation points within an exchange colo environment (at least NYSE Mahwah
and NASDAQ Carteret) so that access is fair (equal latency) for all the
customer cabinets.

------
badosu
Given the limitations of such a medium I wonder if the TCP/IP stack is still
viable or another transport protocol is used.

~~~
JustSomeNobody
I can't imagine they'd need the TCP/IP stack. You might do better with
something like:

SOH<header data>EOH STX<data>ETX CRC EOT

Then the receiver would send an ACK or NACK.

Repeat as necessary.

~~~
dx034
Would you even acknowledge? The data is worthless after one round-trip, so you
wouldn't send it twice. The receiver just needs to make sure that they read
information correctly and can deal with losses.

~~~
jandrese
Wouldn't it be valuable to know if your trade actually occurred?

~~~
dx034
No, your trading engine is on the other end, the link only sends prices. Let's
assume you want to trade on a future in Chicago that's based on London prices
(e.g. a world wide equity index). You know Chicago prices and NYC prices and
what people in Chicago think London prices are. If you then get from London a
price indication that this has changed, you can quickly trade against it to
make money. The London link never needs to know what happened, they just send
prices that could be interesting. All logic sits at the exchange where trades
happen since that's dependent on local prices at time of execution.

------
mhurd
some radio stuff here that may or may not be of interest FWIW:
[https://meanderful.blogspot.com/2017/05/lines-radios-and-
cab...](https://meanderful.blogspot.com/2017/05/lines-radios-and-cables-oh-
my.html)

------
ropeadopepope
Does anybody know what happened to Windy Apple Technologies? They promised the
lowest latency microwave connection from NY to Chicago, then promptly
disappeared...

~~~
alexpil
I'm still around and in the industry.

Never promised the lowest latency, but I was the first one by two years to
build NY<>Chicago.

~~~
ropeadopepope
Thank you for replying! I'm glad to hear you're still around. I was always
impressed with your work.

------
aoki
a meta-comment:

it's weird - i submitted this a couple of days ago
([https://news.ycombinator.com/item?id=17018883](https://news.ycombinator.com/item?id=17018883)),
but it still doesn't show up in the default HN search view. (we even edited
the blog headline the same way!) but it does show up in the "by date" view.

------
tomglynch
So intriguing. Bringing out the old tech for new use cases

~~~
madengr
I wouldn’t call it old tech. It’s just another portion of the spectrum. There
is some pretty advanced stuff going on with HF.

------
wglb
So why not listen in the vicinity of the towers and deduce what frequency this
is on?

~~~
bobvan13
Listening is the easy part. But the sender would be foolish not to strongly
encrypt what they send. Are you really "listening" if all you get after
decoding is pseudo-random bits?

~~~
wglb
Listening will at least you know the frequency and type of modulation so you
can at least understand who it is. And if the signal is always on or at
certain times of the day only can help identify purpose

------
lallysingh
"Garden Leave" is a paid non-compete time (often a year) used in the financial
industry when someone switched jobs. The prior employer invokes it at their
option.

~~~
golergka
I wasn't aware that "paid non-compete" is a thing, thanks for clarifying it.
Next time when I see a non-compete in a contract (which is usual for
developers), instead of negotiating it out, I'll try to negotiate something
like this. What do these agreements usually look like?

~~~
lallysingh
The employer has the option to pay you your salary (not bonus, which is a big
part of your income!) to not work at all instead of you going to a competitor.

I think that the comp part is necessary to make it enforceable at all.

------
vasilipupkin
i have one question: why expend some much energy on unearthing obscure stuff
that has relevance only to a very small subset of a very small industry and
literally nobody else? seems like a waste of effort.

~~~
jlgaddis
Because it's interesting to someone.

I don't understand why my girlfriend likes to watch Youtube videos of other
girls doing their make-up and hair but, then again, she doesn't understand why
I need all the computers that I have.

~~~
vasilipupkin
sure, that's a trivial response that doesn't really address my point. I am
suggesting that the authors could expend the same energy and find or create
something that's much more interesting to many more people.

------
chrisseaton
> Mystery #6: What could be interesting across an ocean?

Err.... the rest of the world?

~~~
ndespres
The question is asked in the context of the tower being owned by U.S.
Cellular, who would not need shortwave antennae pointed across the pond to
service local cell customers.

