In the relentless quest to accelerate stocks, space can be the ultimate frontier.
Today, high-frequency traders use microwaves, lasers and advanced types of fiber optic cable to shave fractions of a second of the time it takes to execute trades. It is a business that depends heavily on the ability to transfer data as quickly as possible between financial centers. Price movements in key markets drive fluctuations in other markets, and HFT companies must compete from one stock exchange to another to adjust trading activity in the light of the latest data. Otherwise, they risk losing money to faster HFT companies with fresher information.
Satellite networks in orbit a few hundred miles above the earth’s surface may represent the next technological leap forward. Starlink, deployed by Elon Musk̵
The satellites in such constellations would orbit the earth far closer than older generations of telecommunications satellites. They are also smaller and cheaper to launch. This makes it possible to deploy networks with hundreds or thousands of satellites, where at least one satellite is always nearby, no matter where on the planet you are, even if the satellites are speeding at thousands of miles per hour. The more advanced projects plan to use laser links between satellites to create fast data networks that cover the entire world. With such a network, a Chicago trader could transfer US futures prices at a satellite cost, which would pass them over a chain of multiple satellites, then down to London. Such space-based connections may be faster than existing networks on Earth.
This has the potential to change the way high-frequency traders send data between exchanges in North America, Europe and Asia.