Free Site Registration

Risk Management: In the Eye of the Storm

Biggest Innovators on Wall Street in 2010 |  CASE STUDY: Goldman Sachs Electronic Trading |  After VaR: Q&A with Ron Papanek |  Europe's Challenge |  NSX Cuts In |  Keep Out, At Your Own Risk

Biggest Innovators on Wall Street in 2010

December 15, 2010

David Barksdale had to cut through mountains with rock saws to achieve his goal. He didn’t actually man the rock saw, but when Spread Networks was done, 100 miles was cut out of the communications distance between New York and Chicago. And every foot counts in the microsecond world of securities activity in 2010.

Here is Securities Technology Monitor’s rundown on the innovations and innovators that had the biggest impact on markets this year. Which even includes one regulator with concern about algorithmically driven trading.



INNOVATORS: Dan Spivey & David Barksdale

TITLE: Spivey, Founder & President; Barksdale, CEO

COMPANY: Spread Networks

INNOVATION: Establish most direct and fastest time for trading messages between New York and Chicago: Round-trip time of less than 13.33milliseconds.

By Katherine Heires

In 2007, trader and derivatives strategist Dan Spivey got fed up trying to find a network that could meet the ultra-low latency requirements of trading strategies designed to exploit spreads in futures and equities markets. So he devised a better way.

His tack: Raise some money, find the right business partner – in this instance, David Barksdale of Barksdale Management Corp. - and build a transport network that would provide a direct, long-distance, superfast, optical connection between New York and Chicago. The innovation from Spread Networks, as the company came to be called, provided a faster connection than any before it, for high-speed, latency-obsessed traders.

The resulting service, officially announced in June and live in August, offers a NY-Chicago fiber route that by itself has to be faster than any other. That’s because it is 825 miles long, more than 100 miles shorter than any prior connection.

That probably saves 1 millisecond, in itself, since light travels about 189 miles in one thousandth of a second. Spread dug straight across and through the hard rock terrain of central Pennsylvania. Combined with ‘clean speed’ technologies, Spread lowered the time long-distance trading messages took, by several thousandths of a second.

Research firm Tabb Group has estimated that a broker loses $4 million a year in annual revenue, for every millisecond lost. As a result, Spread’s offering has gained notice.

The benchmark to beat at the time Spivey got started was 17 milliseconds between New York and Chicago, round-trip. Spread Networks touts a far speedier, 13.33 milliseconds round-trip guaranteed time for customers using Spread’s dark fiber to run their own private optical network and a guarantee of less than 15.50 milliseconds round-trip time for customers using wave service over Spread’s private but shared optical network.

Spivey is the firm’s founder and president while David Barksdale, an attorney and son of famed investor Jim Barksdale, is Spread Networks’ CEO. Barksdale senior, via his family-run investment firm, is the lead investor. Outside estimates place the cost of the network build-out at approximately $300 million.

While Spread Network’s ultra-low-latency network has been described by Tabb Group analyst Kevin McPartland as “truly innovative,” the firm has also announced a bevy of technology partnerships with vendors such as ADVA Optical Networking, Ciena, Endace and Infinera with the goal of enhancing speed and its overall services. To date, the privately-held firm has not disclosed the names or number of customers, but the ultra-low-latency trading set includes the most likely users.

Download the Complete IMPACT REPORT