High-Speed Trader IMC Buys Stake in Ultrafast Microwave Networkby
Deal comes as some traders signal truce in arms race for speed
McKay is open to receiving investments from other firms
Speed trader IMC BV bought a stake in a company that builds microwave radio systems for trading, providing funding that will help the data network compete in the arms race to shave microseconds off trading times.
The Dutch company’s minority stake will provide cash to McKay Brothers, a small, closely held firm that designs data networks for about 50 trading companies via its offices in Oakland, California and Paris. Financial terms weren’t disclosed in a statement on Thursday. McKay will stay independent under co-founders Stephane Tyc and Bob Meade.
Trading firms are increasingly teaming up to share the microwave radio paths that stitch together the world’s major trading exchanges, a sign that the costs required to gain speed are beginning to outweigh the returns. The systems are routing data ever closer to the speed of light and, through companies like McKay, they are also becoming more widely available. McKay says it helps ensure buying and selling in global markets aren’t limited to only big, deep-pocketed players.
“If you build the right network and you allow equal access, you democratize the markets,” said Ari Rubenstein, chief executive officer of automated trading firm and McKay customer Global Trading Systems LLC. “That’s a very good thing.”
IMC was founded in 1989 by two options traders and now operates in 100 markets. Its deal with McKay suggests that being on equal footing with other firms is adequate, and that it will find a competitive advantage some other way, such as through better algorithms or by seeking out talented staff.
As an investor, the Dutch company will receive financial information but no access to client-specific information. The transaction is “very arm’s length,” Tyc said in an interview. IMC doesn’t get a speed edge over other clients, nor does it get better prices.
McKay is among the companies embroiled in a dispute among locals in Richborough, England, where some in the industry are trying to build one or more 300-meter radio towers. McKay is teaming up with Vigilant Global, part of Chicago-based DRW Holdings LLC, to win residents’ support for the project.
A Vigilant spokesman said the firms are in discussions to build a single, shared mast, as sought by the community.
Tyc said the company is open to investments from other trading firms. In exchange for funding from IMC’s stake, “we commit to try very hard to win the race,” he said.