BSO Enlists HFTs for Wireless Data Network

The joint solution will comprise BSO’s fiber network with proprietary wireless radio frequency networks built independently by each of the unnamed firms, and will create the best end-to-end solution, says BSO chief executive Michael Ourabah. The companies will then co-market the solution and share the revenues.

“We’re bundling together the two technical aspects—one being the optical fiber networks, the other being the wireless radio frequency solution,” Ourabah says. “We can leverage our status as a telecom operator to bring this wireless technology inside cable landing stations, which is something our partners are not allowed to do because—even though they have those wireless networks—they do not have the telecom licenses to operate that as a private telecommunication network.”

Ourabah says BSO is targeting market data providers, brokers, hedge funds and tier-one banks as potential clients for the low-latency service. “Right now, we probably have between 15 and 20 clients that are jaw-dropping at the possibility of this happening, and the rest that may benefit still need to be educated…. It’s not a huge market—we’re not going to address 2,000 finance companies as potential clients—but it’s answering the needs of the top of the market that really needs this level of latency and highly technical solutions to lead the market.”

The strategy is to first compete with existing wireless networks covering the New York, Frankfurt and London metropolitan areas using the wireless networks built by the trading firms in each location, before turning their attention to other regions, notably the Middle East, he says.

“We’re shortening the London-New York, London-Frankfurt-Madrid, and London-Frankfurt-Milan routes. We plan to shorten the long haul by making a few key investments to connect the existing wireless portion into our private networks… to give the edge to our clients,” by balancing speed and cost to deliver an economically-viable solution, he says. “Wireless data networks are for a small percentage of our clients, so we’re never going to get rid of the traditional optical fiber network that serves the majority, but a mixture of the two together is going to keep us ahead of the game and give us an edge in the market.”

Ourabah declines to speculate on latency for the new routes, though anecdotal evidence so far suggests wireless networks can cut latency by up to 40 percent over fiber networks.

However, the biggest challenge for BSO as it looks to expand its geographical footprint and turn its attention to less established markets is not achieving low latency, but local regulatory and competition issues, Ourabah says.

“When we look at Dubai, India, Singapore, the Philippines, South Korea and Taiwan, all these are very restrictive from a licensing perspective. The biggest challenge is not getting the funding to build it; it’s not doing it technically; the biggest challenge is the negotiation, paperwork, legal and political challenges. Telecom is a huge financial income for developing countries.... You have to be careful about stepping on their toes, and building an alternative network is doing just that,” he says, adding that the vendor is experiencing resistance to wireless networks in emerging markets. “The existing fiber networks are still pretty much brand new for them, and they don’t understand why fiber is not good enough. So education is a big part of it, and showing that there are benefits from this.”