The film tells in an artistic form about interesting aspects of electronic exchange trading: communication technology and fiber optic networks, the struggle for low latency, competition for every millisecond saved, arbitration between exchanges, the location of exchanges and data centers.
The Russian translation is terrible in the technical part (“neutrons” are mixed with “neutrinos”, “microfibers” with “microwaves”). But let's look a little bit.
The plot of the film is based on the story of Spread Networks , which is incidentally described in the Michael Lewis book “Flash Boys” . In the film, they built a direct tunnel from Kansas to New York and wanted to get an RTT of 16 milliseconds, and in reality Spread Newtorks built a tunnel between Secaucus, pc. New Jersey ( Nasdaq data center) and Cermak, Chicago ( CME exchange data center) with an RTT of 13.1 milliseconds.
Location of data centers
If for someone else this is a secret, I inform you: the computer equipment of the exchange is not necessarily located in the same place as the exchange itself. For example, the New York Stock Exchange is located on Wall Street . But the computers on this exchange, trading and storing all data, are located in the data center in New Jersey at 1600 MacArthur Boulevard, Mahwah, NJ . If you take it in a straight line, it is about 25-30 km to Manhattan. If you need to put your equipment as close to the exchange trading engine as possible , you are not transporting your computers to Wall Street, but to New Jersey.
Therefore, in the film, the cable between the two exchanges is pulled not from the exchange to the exchange, but from the data center of one exchange to the data center of another.
Why in a straight line?
This is where Einstein's theory of relativity, the speed of light, and engineering come into play. If you remember the latency figures , in 1 millisecond the light travels 300 km., I.e. consider that an extra 300 km of cable adds 1 millisecond of delay to your line. And you can’t overcome this delay simply because nothing in our world can move faster than the speed of light. In addition, we take into account that light travels 30–25% more slowly through fiber. The specific speed reduction depends on the quality of the fiber optic cable. Plus, delays are also introduced by data transmission and relay equipment.
In life, communication cables, like roads (railways and cars) do not go in a straight line. Their route depends on many reasons: historical, economic, financial and engineering. In the general case, it is clear that roads and highways are built according to the shortest distance. But in some cases, it is more economical to build a railroad bypassing the Grimpensky bog or Polesskie swamps than directing them through bridges, ghats and swamps. In real life, a hook of several kilometers — two to three minutes by train or car — is not a significant difference. A good example would be the Nikolaev railway, which runs almost straight from Petersburg to Moscow and bends in only one place to bypass a difficult place across the river .
When laying the first telegraph communication lines, the “follow the rails” rule worked (follow the rails). Firstly, railway companies built roads primarily between the main industrial centers of the country. Secondly, they have already resolved all issues with the owners of the land on the redemption of a strip of land along which the rails are laid. Therefore, the telegraph company for laying the telegraph line needed to agree with only one owner - the railway company. Now, when you look at the surrounding landscapes from the window of the car and see the flickering telegraph poles, know the economic background of this phenomenon. It is not surprising that fiber-optic communication lines crawled along the same principle: along the country's main railways, following all their bends.
How to make the path straight?
At the very beginning, the answer of the laying engineer to the question of how you would lay the fiber tunnel from Stockholm to Madrid is interesting. It turned out that if you take into account the curvature of the Earth and drill deeper and in a straight line, you can make the tunnel shorter by 200 km. How much it can reduce the delay in data transfer, consider for yourself.
Map of the path from Spread Networks
The film says: “swamps, fields, forests, mountains - we lay in a straight line, without any workarounds.” Each hook is extra microseconds or even milliseconds of delay. In exceptional cases, hooks still have to be made. Unlike the film, Spread Networks didn’t get the perfect direct: contracts with land owners are a separate headache.
Yes, in some areas it is necessary to drill through the Apallachi . These are iconic mountains in the United States, such as the Alps or the Carpathians in Europe, or the Ural Mountains in Russia. This is the old border of the first English colonies, beyond which the land of the Indians and the territorial possessions of France once began. On the one hand - the east coast of the United States with financial centers New York, Boston, Philadelphia, and on the other side of the mountains - Chicago, Kansas and the rest of the United States. How a tunnel is drilled through old million-year-old granite is shown in the film, namely: long, expensive, stubborn, tedious, breaking expensive drills.
And can it be even faster?
If the light travels through the cable more slowly than the speed of light, is it possible to do without a cable at all? Can. Microwave towers (promising 14 milliseconds between Kansas and New York, and then 11 milliseconds in general) and even laser towers are mentioned in the film.
The Michael Lewis book Flash Boys talks about some mysterious financial companies that invest in the purchase of radio masts between New York and Chicago with the help of which, through high-frequency radio communications, financial data will be transmitted at a speed approaching the speed of light. For such a connection, there are no difficulties with land allotment, agreements with landowners, swamps, mountains and nature reserves. The transmission is approaching the perfect line. You can even ignore the curvature of the Earth, if you lift the mast higher!
Yes, there’s only one problem: the connection is unreliable! This is known to everyone who is fond of KV sports . Thunderstorm with lightning, flashes in the sun, clouds, fog - and the connection deteriorates just when you have a critical warrant at stake.
Who needs this?
In general, cable routers do not trade themselves. The business plan of the project is that by laying the cable and proving its speed, sell the cable bandwidth directly to financial companies, which themselves take care of how to benefit from a higher data transfer rate. That is, the owner of the cable acts as a communication company.
In the case of Spread Networks, the band began to be sold long before the completion of construction (such advances financed the construction itself). Financial companies bought the band, not knowing exactly how they would use it, simply because their competitors did it, i.e. so that competitors do not have an advantage.
Cable builders typically lay overhead throughput. Shifting a new cable will cost more. In fiber optics, light pulses are used to transmit data. While the channel is not used, it is called " dark fiber " (dark fiber), there can be several dozen such channels in the cable. If you buy "dark-fiber", this means that you rent a channel for your exclusive use, no one else will transmit your data on this channel. This term also appears in one dialogue in the film. Interestingly, the ordinary viewer understood what was going on?
How do financial bigwigs make money on this?
In general, in any life situation it is useful to know something before others. Earlier than others, he learned that the Titanic would sink, the first to hit the boat . Earlier than others, I found out in which store the Finnish boots or a subscription to Dumas had been thrown away, ran in and took the first place.
The film exaggerates the use by traders of the advantages of a communication line with less delay than that of competitors. This is the cost of cinema.
Financial companies use this line of communication for trade arbitration between Chicago and New York. And the faster the data is transferred from one point to another, the more likely it is to catch the case of arbitration. All the more chances to use the arbitration case for profit.
Spread Networks has invested 200 million USD in the construction of its network from New York to Chicago with a length of 1,327 kilometers 425 meters. Imagine how much it cost customers to rent a strip in this cable. Imagine how much customers had to earn in order to pay off the rent of this strip.
Is it moral? This is a philosophical question. In the film, he also rises. Is it legal? Yes.
Race to zero
This is the name of the race for minimum zero-latency delays at all levels of the trading system. Delays that were previously considered insignificant are now examined under a microscope. From each element of the system, from the code of the trading application down the technology stack to the level of network cables, more and more thin latency chips are removed. Knowing where to look for delays and how to deal with them is very expensive. Therefore, in the film you hear about salaries of 300,000 dollars a year and bonuses of half a million for a simple geek programmer. And this race continues to this day. The proverb “time is money” (“whoever got up earlier - that and slippers”) has received its real embodiment.
FBI, prison, lawyers
The film uses the story of Sergey Aleinikov and Goldman Sachs only in other names. But unlike the film, the real Aleinikov could not easily get out of prison. A very sad case in the life of a programmer through which a locomotive of a financial corporation moved.