Pigeons to Picoseconds: The Relentless Race to Zero Latency in Financial Markets

Prior to the 1900s, the most competitive trading edge might have been a carrier pigeon. Fast-forward to 2025, and we're talking about quantum-timed algorithms, laser networks, and fibre paths engineered through mountains to save microseconds.

 

The journey from physical message to digital micro trade isn’t just a story of technological progress; it’s the story of how speed has redefined value in financial markets.

 

Let’s take a look at how latency has evolved and what it means for investors today.

 

What is latency?

 

Latency is the time delay between sending a trading instruction and executing it. In financial markets, lower latency means faster execution, and in high-frequency trading, even a few microseconds can mean the difference between profit and loss.

 

1900s: Telegraph wires and the birth of the ticker

 

In the early 20th century, telegraph lines and stock tickers revolutionised market communication. Previously, orders were hand-delivered or sent via mail couriers - sometimes even via pigeon (famously in Belgium's financial districts).

 

By the 1920s, ticker tape machines could deliver quotes across city centres in minutes - an astonishing improvement at the time.

 

Latency: Minutes to hours

Edge: Being near a telegraph office or exchange floor

 

1940s–60s: Radio waves and the mainframe era

 

By mid-century, radio broadcasts began relaying market news, while the first mainframe computers enabled batch processing of trades. Communications were still slow and localised, but centralisation helped institutions gain visibility over positions and prices.

 

Latency: Seconds to minutes

Edge: Access to institutional infrastructure and processing power

 

1970s–80s: Computers hit the floor

 

The introduction of electronic trading terminals like Reuters and Bloomberg changed everything. Orders could be executed via a screen rather than a phone, and networks began to link desks globally.

 

The rise of electronic matching engines started to level the playing field, albeit relatively briefly.

 

Latency: Seconds

Edge: Direct market access, real-time data feeds

 

1990s–2000s: Fibre, speed, and fragmentation

 

With the rise of the internet and global trading, fibre-optic cables became the arteries of financial information. Exchanges began to fragment, opening opportunities for arbitrage between venues.

 

Firms started physically co-locating servers inside exchange data centres, and latency became measured in milliseconds for the first time.

 

Latency: 1–100 milliseconds

Edge: Location, routing strategy, and execution algorithms

 

2010s: The HFT arms race begins

 

This era marks the Flash Boys generation, highlighted in a popular book and made into a movie. Firms spent hundreds of millions on dedicated point-to-point fibre links (e.g. Spread Networks’ Chicago - New Jersey cable) just to reduce latency by a few milliseconds.

 

Soon after, microwave transmission, faster than fibre due to the straight-line path, became the new standard for ultra-low latency routes. Every microsecond saved could translate to millions in trading profits.

 

Latency: Microseconds

Edge: Custom infrastructure, predictive algorithms, physics

 

2020s–2025: Microwave, lasers, and the quantum frontier

 

Today, firms compete using microwave towers, free-space lasers, and even experimental satellite relays. Some are developing quantum clock synchronisation to further reduce nanoseconds in trade matching.

 

We're also entering the picosecond era (one-trillionth of a second), where differences are invisible to most but lethal in algorithmic execution. This is a specialist/expensive area of trading and certainly not standardised across all trading firms.

 

Latency: Microseconds to picoseconds

Edge: Hardware-engineered systems, geographic proximity, and exclusive access

 

Why does it matter?

 

For most long-term investors, latency seems irrelevant. But in today’s hyper-fragmented market, where dozens of exchanges and dark pools compete for liquidity, speed can distort price formation, influence slippage, and subtly shift execution quality.

 

High-frequency traders (HFTs) use speed not to predict direction but to exploit information gaps between when an order is placed and when it completes. Even a 10-millisecond advantage can allow them to step in front of a trade and extract a spread.

 

While many HFTs do provide liquidity and tighten bid-ask spreads, critics argue that markets have become too focused on speed, not value.

 

Conclusion: The race isn't over, but the rules are changing

 

The journey from pigeons to picoseconds reflects the broader evolution of capital markets: each technological leap creates new winners, new inefficiencies, and new questions about fairness.

 

Today, the edge isn’t just how fast you are; it’s how well you combine speed with strategy. As regulators examine latency arbitrage more closely and exchanges test mechanisms like speed bumps (IEX) or batch auctions, we may see a shift from pure speed to smarter structure.

 

But make no mistake: in the world of modern finance, time is still money. Only now, that time is measured in billionths of a second.

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