Introduction

In High Frequency Trading, distance is measured in Nanoseconds, not Meters. $Speed = \frac{c}{n}$. In a vacuum, light travels 300km/ms. In glass fiber, it slows down to 200km/ms. This 30% penalty is the difference between profit and bankruptcy.

This lesson explores the extreme physics of Colocation-where we fight the laws of the universe to save 5 nanoseconds.

The Physics: Refractive Index ($n$)

Light does not travel at $c$ in a fiber cable. It interacts with the glass silica. Refractive Index ($n$) of Glass: ~1.468. $V_{fiber} = \frac{c}{1.468} \approx 204,220 \text{ km/s}$

The Cost of 1 Meter: $T = \frac{1m}{204,220,000 \text{ m/s}} \approx 4.89 \text{ nanoseconds}$

Every meter of cable adds ~5ns of latency. In the Aurora data center (CME), racks are positioned such that the fiber length to the matching engine is identical for everyone equalized to $\pm 1$ meter (5ns).

Deep Dive: HFT Networks (Microwave)

Why do we use Radio Towers between Chicago (CME) and New Jersey (NASDAQ) instead of Fiber? Because Air has $n \approx 1.0003$. Microwave travels at 99.97% of $c$. Fiber travels at 66% of $c$.

The Physics:

• Chicago -> NJ (Fiber): ~1200km path (zig-zag). Time: ~6.5ms.
• Chicago -> NJ (Microwave): ~1200km path (line of sight). Time: ~4.1ms.
• Edge: 2.4 Milliseconds. In HFT, this is an eternity.

Architecture: Layer 1 Switching

Normal switches Store-and-Forward packets (Read into RAM -> Route -> Send). Latency: ~5000ns. HFT uses Layer 1 Switches (e.g., Arista 7130 / Metamako).

Physics: They do not read the packet into RAM. They operate as Electronic Mirrors. As soon as the first bit arrives, it is electrically copied to the output port. Latency: ~4 nanoseconds.

Code: Calculating Light Latency

C_VACUUM = 299_792_458.0 # m/s
N_GLASS = 1.468
N_AIR = 1.0003

def fiber_delay(meters):
    speed = C_VACUUM / N_GLASS
    return meters / speed * 1e9 # in nanoseconds

def microwave_delay(meters):
    speed = C_VACUUM / N_AIR
    return meters / speed * 1e9 # in nanoseconds

print(f"1km Fiber: {fiber_delay(1000):.2f} ns")
print(f"1km Air:   {microwave_delay(1000):.2f} ns")
# Result: Fiber is ~1500ns slower per kilometer.

Practice Exercises

Exercise 1: The Cabling (Beginner)

Scenario: You replace a 10m fiber patch cable with a 2m cable. Savings: 8 meters. $8 \times 5ns = 40ns$. Impact: You now beat everyone using the 10m cable. (Unless the exchange equalizes).

Exercise 2: Rain Fade (Intermediate)

Scenario: Heavy rain in Pennsylvania. Physics: Rain drops absorb Microwave frequencies (especially 60GHz+). Result: Microwave link goes down. Traffic falls back to Fiber. Latency spikes by 2ms. This is why HFT algos turn off during storms.

Exercise 3: Hollow Core Fiber (Advanced)

Scenario: New fiber with an air core ($n \approx 1$). Advantage: Speed of Microwave + Reliability of Fiber. Status: Extremely expensive, currently being deployed in key routes (London-Slough).

Knowledge Check

1. What is the Refractive Index of standard fiber?
2. Why is Microwave faster than Fiber?
3. What does a Layer 1 Switch do?
4. What happens to Microwaves when it rains?
5. Why do exchanges coil fiber cables?

Summary

• Glass: Slow ($0.66c$).
• Air: Fast ($0.99c$).
• Distance: 5ns per meter.

Pro Version: See the full research: The Nanosecond Economy