High-Frequency Trading Fight Escalates as a New Tower Blooms
(Bloomberg) -- The tower generated controversy when it was just an idea, before a single metal pole went up in a mostly empty plot in suburban Chicago. It became a reality within the past two months and now looms about a thousand feet from what’s arguably the most important financial market in the world.
The 195-foot structure belongs to Scientel Solutions LLC. The company’s neighbor, CyrusOne Inc., was so enraged by the plan that it sought to block the tower in January 2018 by suing Scientel and the city of Aurora, Illinois, which had approved the project. That case is still going on, but to some degree it’s moot: Construction wrapped up this month, and the tower is blooming with antennas.
CyrusOne argues that its own tower is obstructed by Scientel’s, which Scientel denies. The CyrusOne structure, a 350-foot column that went up across the street last year, sits mere feet outside the walls of the CyrusOne data center that houses CME Group Inc.’s derivatives exchange. Chicago-based CME is a $64 billion behemoth, the place for trading futures contracts linked to the S&P 500, oil, Treasuries and many more vital products.
CyrusOne says its tower is meant to end gamesmanship by traders, who spent years and millions of dollars to move their wireless equipment a little closer to the building. That’s helped give them an edge by shaving millionths of a second off the time it takes to convey their orders between CME and other major exchanges, including stock markets on the U.S. East Coast.
Though an imperceptibly small amount of time for humans, that’s enough to turn a losing bet into a winning one in this computer-driven era of trading.
The CyrusOne tower is closer than traders could otherwise get to the data center. So, if unimpeded, it would probably be the most attractive spot for traders to put communications equipment, which CyrusOne says would make accessing CME more fair.
In an interview this week, Scientel President Nelson Santos addressed the subject of much industry speculation about his tower: whether it will be used for trading. He said none of the antennas on the structure are currently used for that purpose, but that will change at some point. The Scientel tower, Santos said, will connect wirelessly to CME by beaming signals to the CyrusOne tower. He declined to identify his trading customers, citing non-disclosure agreements and competitive reasons.
Meanwhile, across the street, there’s also been activity on CyrusOne’s tower. Although it was fully constructed last year, it was essentially naked until a few weeks ago, when the first antenna was attached. People have been observed climbing the tower this week and last.
CyrusOne and CME declined to comment.
Federal Communications Commission records show three entities are licensed to operate from the CyrusOne perch: Jefferson Microwave LLC, New Line Networks LLC and Webline Holdings LLC. Jefferson is part of Oakland-based McKay Brothers, which builds telecommunications networks and leases access to traders. New Line Networks is a joint venture of two major traders: Chicago’s Jump Trading LLC and New York-based Virtu Financial Inc. Webline is another big trader: DRW Holdings LLC of Chicago.
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