Did you just blink? How long did it take? When we want to say something happened quickly, we often exaggerate by saying it happened "in the blink of an eye," which usually takes less than half a second. But to many financial firms, the blink of an eye is an eternity.
For algorithmic and high-frequency traders--investment firms that use computer programs to buy and sell securities in rapid response to market fluctuations, often without human intervention--millions of dollars can be made or lost in a millisecond (a thousandth of a second), a microsecond (a millionth of a second) or less. 
The rise of electronic and algorithmic trading has accelerated in recent years thanks in part to changes in U.S. Securities & Exchange regulations known as Regulation NMS, giving rise to a new breed of traders focused on exploiting barely perceptible market fluctuations in real time. For those traders, typical WAN data connections to financial exchanges like NASDAQ and the NYSE are far too slow. What they need is not more bandwidth, however, but much less latency--the time it takes for a bit to reach its destination. This need has given birth to a new market for ultralow latency telecom services cropping up in (and between) the world's leading financial markets--New York, Chicago, London and beyond.
Competition in this space is nearly as cutthroat as is algorithmic trading itself. Just a few months after one carrier offers transport from Chicago to New York in 17.5 milliseconds, another will offer it in 17.0 milliseconds, and another in 16.5, so on. So the margin of success actually becomes fractions of a millisecond, or about 0.001 times as long as it takes to blink your eye. This summer a new company, Spread Networks, emerged from stealth mode after years of stringing fiber from Chicago to New York just to shave a few milliseconds off the market's leading latencies. Despite these stringent demands, though, it's not hard to see why carriers from Level 3 Communications to AboveNet and Zayo are chasing this opportunity. Because financial firms stand to win or lose millions of dollars depending on milliseconds of latency, they're happy to pay very handsomely for fast networks.
"We continue to be shocked by what people are willing to pay," one service provider recently told me.
In fact, the overriding importance of low latency not only makes this market more lucrative than traditional connectivity, it completely alters the nature of the business, from contract terms and service level agreements to the potential for competitive differentiation among providers. Folks in the low-latency game like to tell the story of the carrier that offered low-latency services over seven fibers between Chicago and Washington D.C. According to legend, a single hedge fund purchased all seven fibers, not because it needed that much capacity but because it reasoned that it was worth the money to deprive its rivals of that route. I don't know firsthand if that story is true, but I know it's not surprising, having spoken with many players in this space for NPRG's recent report on the subject.
This market isn't limited to the traders themselves. In addition to financial exchanges, Alternative Trading Systems and clearing firms, low-latency circuits are increasingly in demand among a growing crowd of specialist providers that use low-latency connections in order to serve the financial community with trading software, real-time market data and other targeted solutions. Meanwhile, international carriers are buying regional and local capacity to serve this market. National carriers and data-center players are buying local connectivity. Local network providers are buying cross-country capacity. And dark fiber providers are simultaneously selling to low-latency service providers and to their financial-firm customers alike.
This market developed quickly, in keeping with its customers' characteristic attention to speed, and it will continue to do so, posing daunting challenges for service providers who may--like the traders themselves--lose big business simply by being a millisecond slower than their rivals. They truly can't afford to blink.
Ed Gubbins, Senior Analyst for New Paradigm Resources Group, is a FierceTelecom columnist.