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New Jersey rooftop is latest battleground in arms race for higher-speed trading


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New Jersey rooftop is latest battleground in arms race for higher-speed trading

A fight is brewing on Wall Street over a New Jersey rooftop.

In a letter to the SEC, Virtu Financial Inc. cried foul over what it says is a "blatantly anti-competitive" plan from the Intercontinental Exchange Inc.-owned New York Stock Exchange to limit access to microwave technologies that the exchange wants to install on the roof of its Mahwah, N.J., data center. The exchange is only making the equipment available to one wireless provider, a move that Virtu says will give NYSE the power to charge "exorbitant" prices for access. NYSE, according to Virtu's letter, attributes the singular access to resource and engineering limitations.

"The reality is that the new 'floor' of the NYSE is actually now located on the roof of a nondescript datacenter in Mahwah, New Jersey," Virtu wrote in its letter.

"In the same manner that the NYSE would never have been permitted to sell positions on the floor of the exchange on Wall Street within earshot of the specialists to the detriment of the rest of the members for a premium price, so, too, should it be impermissible for the NYSE to do the same with rooftop access to the new exchange 'floor,'" the company wrote.

While NYSE's plan has already been approved by the Town of Mahwah, Virtu asked the SEC in its letter to review the zoning variance that the exchange received "to determine whether it constitutes anti-competitive behavior." According to the letter, Virtu has also previously held a call on the issue with the regulator.

Spokespeople for the New York Stock Exchange and the SEC declined to comment.

The tension over NYSE's plan marks the latest development in a yearslong push for speedier access to trading data.

Wall Street's fastest traders, by and large, rely on microwave connections sent via antennas and satellites to relay stock trading information around the world in a fraction of a second. Information sent via microwave between Aurora, Ill., where CME Group Inc.'s key data center is housed, and Carteret, N.J., the home of Nasdaq Inc.'s data center, would take about 8 milliseconds, according to TABB Group. It would take about 12 milliseconds for the same message to travel between Aurora and Carteret by way of fiber-optic cable.

The reliance on such low-latency technologies has created an arms race where companies feel it is a necessity to match or beat a competitor's speed, even by thousandths of a second. But other market participants push back on the continued emphasis for speed, saying it ultimately raises costs for end-investors.

"We're fine without the wireless speed," Virtu spokesperson Andrew Smith said in an interview. "We think a level playing field is more important than extracting the 'nth' microsecond savings at a cost that just creates a tax that is passed on to investors."