New submarine cable may aid HFT in Asian bourses
NTT Communications’ new subsea cable has been connected to Hong Kong and could support the development of high frequency trading (HFT) across several Asian bourses. The ultra-low latency cable links Hong Kong with East Asian business hubs Japan, Singapore, the Philippines and Malaysia and has a total carrying capacity of more than 15 terabits per second – 60x Hong Kong’s peak total internet traffic.
“As the reliance on global network connectivity, fuelled by rising internet usage, reaches new heights in Hong Kong, businesses are seeking for faster and more reliable network services. The ASE [Asia Submarine-cable Express] will offer both unparalleled ultra-low latency performance to the region as well as high resiliency on natural disasters and support enterprises’ growth, in particular financial institutions for which every millisecond counts in the highly competitive market,” said Brandon Lee, chief strategy officer, NTT Com Asia, in a company statement. He added: “We are confident that ASE and the new Financial Data Centre (FDC) will strengthen Hong Kong’s strategic position as a global financial hub.”
High frequency trading on the Hong Kong bourse has not proliferated as quickly as in most other developed markets given that the stamp duty of 0.1% of the transacted value payable by buyer and seller easily exceeds the marginal profits per HFT trade. A rising number of “dark pools” have been licensed to conduct share trade in the SAR, leaving some to suggest HKEx may see itself exposed to greater competition. Per ordinance, however, transactions conducted off-exchange in Hong Kong demand a fee payment to the HKEx. Nonetheless, some have argued that HFT could further boost competitiveness of the bourse and Hong Kong as a financial hub as a whole. HKEx said yesterday it has no comment on NTT’s FDC project.
The Hong Kong government welcomes the landing of the submarine cable. “This new submarine cable system, the eighth in Hong Kong, will not only boost significantly our external telecommunications capacity, but will also contribute to the overall network resilience of both Hong Kong and the Asian-Pacific against earthquakes and other natural disasters,” said Eliza Lee, director-general of communications, Office of the Communications Authority, during the landing ceremony last week. The cable bypasses areas prone to seismic activities and typhoon zones in the APAC region.
NTT’s high speed cable – that measures 7,800 km in length and cost US$430 million to complete – boasts a latency of just 65 milliseconds on the Japan and Singapore route. This is leading in the industry, the company says. Figures between Hong Kong and Japan will be known after the company concludes testing in January.
The landing station is located in Tseung Kwan O, adjacent to NTT’s FDC -- which will launch in the second quarter of 2013 -- and across the street from HKEx’s own data centre. According to the company, the FDC will be the first in Hong Kong to fulfill Tier IV infrastructure requirements, that is, feature dual-powered cooling, power, and network links to guarantee availability 99.995% of the time.
Japan, the Philippines, Singapore and Malaysia were connected in August. Apart from NTT Com, Telekom Malaysia, the Philippine Long Distance Telephone (PLDT), and StarHub of Singapore are partners to the project.