Back in March, when looking at the main antenna array at the real "New York" Stock Exchange located off Route 17 and MacArthur Boulevard in Mahwah, New Jersey, we noticed something peculiar: instead of just housing various now traditional microwave dishes...

... a new device had quietly appeared.

The "device", as Extremetech explained in early 2014, was the AOptix IntelliMax laser (used in various US defense programs), and now generously provided by Anova to various very wealthy HFT clients - in exchange for a very generous installation and recurring monthly fee - who desired to eliminate the 0.18 millisecond microwave latency between the NYSE and Nasdaq, by going straight to laser.

High-frequency trading — the practice of making thousands of algorithmic stock trades per minute — is about to get a big boost in the USA. Anova, a company that specializes in deploying low-latency networks for stock trading, is completing an ultra-high-speed laser network between the New York Stock Exchange (NYSE) and the NASDAQ. The link will be just a few nanoseconds faster than the current microwave and fiber-optic links — but in the world of high-frequency trading (HFT), those nanoseconds could result in millions of dollars in profits for the trading companies. Such is the insanity of the stock markets; such is the unbelievable capacity of HFT to create money out of almost nothing. If you want to get a signal quickly from point A to point B, you basically have three options: fiber-optic cables, a network of microwave dishes, or laser links. Electrical (copper wire) networks are feasible over short runs, but their reduced functionality and bandwidth over longer runs makes them less desirable than fiber. Microwave (and even higher-frequency millimeter wave) networks also aren’t very high-bandwidth, but because they’re purpose-built, they can take a very direct route, significantly undercutting the latency of an oft-congested and round-about fiber network. Laser networks have all the advantages of microwave/millimeter wave networks, but they have higher bandwidth, and some very clever adaptive optics means they’re not impacted by bad weather. (Microwaves really hate inclement weather.)

Last year, Anova completed a laser network link between the London and Frankfurt stock exchanges, and now, it seems the company is nearing completion on a similar laser network between the NYSE and NASDAQ data centers in Mahwah and Carteret, New Jersey. In the case of both networks, Anova is using equipment provided by AOptix, an American company that is contracted by the US military to produce similar laser-based systems for ground-to-aircraft communications. Each AOptix base station is capable of “carrier-grade” availability (five nines, 99.999%) over a distance of 10 kilometers (6.2 miles). The route, which is about 35 miles as the crow flies and skirts the center of Newark, will probably feature around six or seven base stations, each of which will have a direct line of sight with its two nearest neighbors. The link speed, according to the AOptix tech specs, will be around 2Gbps — not exactly massive by fiber-optic standards, but more than enough for a few thousand trades per second. The cost of building the network won’t have been cheap — probably a few million dollars — but that’s absolutely pennies for stock traders. (The new fiber link between London and Tokyo, which is also primarily for stock traders, will cost $1.5 billion.) The exact latency improvement of the NYSE-NASDAQ laser network isn’t yet known, but over a distance of just 35 miles we’re probably talking about nanoseconds. A microwave system currently in place between Chicago and NYC — a straight-line distance of around 800 miles — has a latency of 4.13 milliseconds. Scaling that down to 35 miles (dividing it by 23), you get a latency of 0.18 milliseconds between the NYSE and NASDAQ. I don’t know how fast the existing fiber/microwave links are, but even a difference of a few nanoseconds would be enough to beat out other high-frequency trading companies that are using older, slower networks. Anova, unsurprisingly, says it has dozens of trading firms who want to use the new laser network, all of which could stand to boost their profits. Though, as with all HFT technology, once everyone is using it (or something comparable) profit levels will revert. And thus the craziness that is high-speed trading continues unabated, faster and more profitable than ever before

The WSJ also chimed in:

In 2011, [Anova CEO] Michael Persico read an article in a trade journal describing how a Silicon Valley company called AOptix Technologies Inc. had designed military technology using lasers to communicate in battlefield conditions. His first thought: "I wonder if they can put those on a tower?" The technology traced back to the 1990s, when two scientists designed a method to gather images from outer space that corrected for atmospheric distortions. They developed technology for telescopes with flexible mirrors that could adjust thousands of times a second. Soon, they realized the technology could also be used to transmit data using lasers. They formed AOptix and contracted with the U.S. government to provide communication devices for military aircraft. Mr. Persico asked AOptix whether its laser system could be used to send stock-market data. The company was confident it could, because stock data would only have to move from one fixed spot to another. "Finding a tower isn't hard for us, because we can find airplanes" with the lasers, said the CEO of AOptix, Dean Senner. * * * The Treasury Department's Office of Financial Research in December labeled high-speed trading a "key source of operational risk across all markets." * * * "Speed makes markets way more efficient," said Peter Nabicht, a former high-speed trader who is now a senior adviser to Modern Markets Initiative, a trade group. * * * Mr. Persico set about securing rooftops and other spots to place his lasers between the New Jersey communities housing the NYSE and Nasdaq data centers. Anova said it has dozens of trading firms waiting to try the lasers when they go live. One firm that plans to use the system is XR Trading LLC of Chicago. It is a "very compelling technology," said XR's president, Matthew Haraburda. He said if it behaves as intended, it could be "a huge development" in trading technology. * * * Some question whether Anova's lasers will provide a meaningful speed improvement over networks that are already in place, since microwave and millimeter-wave order transmissions also travel at near light speed.

The answer, we now know, is a resounding yes.

Because while a few months after our article showcasing the NYSE's latest technical achievement we noticed that the Anova laser had been taken down from its primary location, perched among all the microwave dishes, in the past few days there was a drastic change.

First, here is a quick look at the main microwave tower at the NYSE, highlighted below in yellow.

The AOptix laser device, previously located on the main microwave tower, is still nowhere to be found.

And yet, in the same photo, something unexpected has shown up in the backgroun: a new tower, erected just in the past few days, and highlighted in the image above in red.

Here is the tower shown closer. In fact, unlike the microwave tower, this new, just erected one is located literally right on the main NYSE entrance.

Wait, what's that at the top, are those...? Yes, they are: not one, not two, not three, but four brand spanking new lasers.

Here is the the best our zoom lens could do.

And with that we can now close the case on the WSJ's question "whether Anova's lasers will provide a meaningful speed improvement over networks that are already in place" - because whereas 9 months ago there was only one laser unit, now there are four, all on a dedicated tower, and we are confident many more are coming in the next few weeks, as all users of the suddenly obsolete microwave technology, who until recently were used to having the latest and greatest in frontrunning technology, realize they are being frontrun by their even faster, laser-based peers.

Which takes us back to the microwave tower, where we find not only what may be the world's most important (if only for a few more months) fully-exposed power supply cables...

...but the following sad remnant of a bygone era, and by bygone era we mean the peak in technological sophistication just 3 years ago, when microwaves ruled the financial world and were the absolute pinnacle of rigged market frontrunning: a sad microwave dish lying face down in the gravel.

A zoom in of the now defunct technology for all to see:

* * *

Nine months ago we concluded by saying that everyone who splurged millions on the "brand-new" - as recently as 2013 - microwave technologies to give their HFT system a leg up... is now obsolete.

Welcome to lasers: where you are either part of the very expensive club, or are being frontrun. Which also means that if Michael Lewis is indeed writing a sequel to Flash Boys focusing on microwave signals and towers as the "next big thing", he may just want to burn the manuscript.

As for what comes next, the WSJ suggested the following: "Some dream of a replacement for the fiber-optic cables across the Atlantic and Pacific. The idea: Turbocharge intercontinental trading by floating balloons carrying microwave dishes over the ocean."

Scratch that: the only option left now to trade ahead of everyone else with impunity - and entirely within the confines of post Reg NMS law - is to use lasers: laser beams encircling the globe, allowing speed-of-light quote stuffing, churning, momentum ingition, subpennying, spoofing, layering, intermarket sweeping and everything else that allows some to profit from everyone else in these rigged markets.

Because this, ladies and gentlemen, is what "trading" has become.

(That said, one wonders just what would happen if one flies, say, a drone in front of one or all of those lasers during, say, peak market hours or, heaven forbid, just a few milliseconds before the Fed announces its next "most important ever" policy decision.)