Physical Layer Optical Splitter for High Frequency Trading Latency
Find Innovative SolutionsGenerate Solutions
Solution Overview
Problem
High frequency trading environments face significant latency when communicating trading information from exchanges to customers due to existing methods that split optical signals at higher layers of the OSI model, leading to increased delays and potential packet loss, corruption, and jitter.
Innovation Solution
Implementing a physical layer splitter to split optical signals at the physical layer (Layer 1) of the OSI model, bypassing higher layer operations, thereby reducing latency and ensuring reliable transmission to multiple hosts without packet copying or storage, using technologies like Fused Biconical Taper, Planar Lightwave Circuit, or passive star couplers.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If optical signals are split at higher layers (Layer 2 or Layer 3) of the OSI model, then signal routing and management are simplified, but latency increases to 20-25 milliseconds and packet loss, corruption, and jitter occur
Solution Approach 1:
The patent applies segmentation by dividing the signal splitting function across multiple physical layer devices. Instead of processing at higher OSI layers, the system uses multiple physical layer splitters to distribute the optical signal to multiple hosts simultaneously, eliminating the need for complex routing and management while achieving nanosecond-level latency.
2Reliability
If optical signals are split at higher layers of the OSI model, then network protocols and addressing are maintained, but latency increases and signal reliability decreases
Solution Approach 1:
The patent replaces the mechanical/electronic processing system at higher OSI layers with a passive optical physics-based system at the physical layer. By using optical splitters that distribute signals based on physical principles rather than protocol processing, the system achieves both high reliability (no packet loss or corruption) and low latency (2-5 nanoseconds).
3Reliability
If packet copying and storage are performed at higher layers, then data integrity can be verified, but latency increases significantly and trading speed is reduced
Solution Approach 1:
The patent applies preliminary action by performing signal distribution at the physical layer before any higher-layer processing occurs. The optical signal is split and delivered to multiple hosts simultaneously at nanosecond speeds, allowing parallel processing and eliminating the need for sequential packet copying and storage operations that would slow down trading execution.
Data Source
AI summary
A system includes an optical splitter that may receive an optical signal containing trading information from over an exchange network. The optical splitter may split the optical signal at a physical layer into a plurality of signals and transmit the plurality of signals toward a plurality of hosts at a customer end, which may execute transactions using the trading information.