Financial markets firms are pouring considerable amounts of capital and human resources in order to achieve sub-millisecond response times, and microwave is on the shortlist of transmission modes that are garnering the most attention.

“They are investing in highly scalable infrastructure, both in regards to communication lines as well as computing resources,” said Andreas Kunter, chief executive of Dolphin IT Services, a German-based provider of public clouds, private clouds and dedicated cloud platforms. “If you can cover peaks and high traffic more easily, and maybe even automatically, you usually have an edge over your competitors.”

The question of how much to invest is not easily answered, “only that it becomes more important to react quickly and serve your customers in time, so the money invested in such infrastructure has been steadily growing over the last years”, said Kunter.

Fiber, though, is the most resilient and highest capacity transport media among the viable options today. When it comes to latency, however, fiber has some limitations that microwave can trump.

Fiber routes are typically buried in the ground or hung from poles, and in either case they follow existing rights of way such as roads and utility easements, which are not typically along the most direct route.

Microwave, on the other hand, is a line of sight technology enabling deployment along a more optimal path.

Additionally, microwave has a “speed of light” advantage over fiber that has to do with the physics related to the refractive index of light passing through glass versus through the air.

“The physics are such that fiber effectively slows down the speed of light leaving microwave transmission through the air roughly 50% faster than transmitting light over fiber,” said Mark Casey, president and chief executive of CFN Services.

“Thus, the straightening of the path and the unmitigated speed of the light lowers the latency on a given route versus fiber, thus giving microwave the edge in an outright speed war,” Casey said.

On the other hand, the strengths of fiber, availability and transmission capacity are the exact weaknesses of microwave.

Microwave is limited in the capacity of data it can transmit on any given point to point path, and microwave can be subject to interference from weather and precipitation.

“While you can engineer microwave networks around these interference issues, doing so has a negative impact to the latency design,” Casey said.

Some financial companies are running their own data centers, backed up by large telecommunications providers. But when it comes down to how to use new technology (e.g. clouds), these companies turn to specialized providers who have a lot of experience in this branch.

“The large players like Amazon, Google, Rackspace, etc. are of little interest to European companies, because they usually cannot fulfill data security laws in these countries,” said Kunter of Dolphin IT Services.

For example, no German financial company would make the move into a cloud without a data center located in Germany.

“That would mean having their customers agree to store personal data under foreign data security laws, and most companies do not want to tackle this,” said Kunter. “Even a German data center from Amazon poses the risk of being subject to the U.S. Patriot Act, which could violate German data security laws.”

However, firms in the top tier are investing in ever faster transport media such as microwave. A microwave network can cost anywhere from $500,000 to upwards of $10 million depending on capacities and distances covered.

“Firms in lower tiers are working on getting the best combination of speed and cost,” Casey at CFN Services said. “Many are still leveraging the latest and fastest fiber routes, but once a fiber route is no longer the best, it becomes considerably more affordable even though it may only be handfuls of microseconds slower than the best, enabling more firms to improve performance.”