Spread Networks

Spread Networks is a specialized telecommunications and network-infrastructure company associated with one of the most prominent low-latency connectivity projects in electronic finance. Its principal network links the Chicago financial market, including the Chicago Mercantile Exchange area, with the New York metropolitan market, including the Nasdaq data-center area in Carteret, New Jersey. The service was designed primarily for financial firms, especially high-frequency trading businesses, for which a difference of fractions of a millisecond can affect the order in which market data is received and trades are executed. The business originated from a market-structure problem identified by founder Dan Spivey. In 2007, while working on an arbitrage strategy involving discrepancies between Chicago futures and related equities traded in New York, Spivey encountered the practical limits of existing network connections. The strategy could be designed successfully, but access to the fastest available communications path was unavailable or insufficient. He therefore investigated whether a purpose-built route could reduce the distance and latency between the two markets. James L. Barksdale, the former Netscape chief executive, backed the project financially. Spread Networks constructed an approximately 827-mile, or 1,331-kilometre, fiber-optic route between the Chicago area and Carteret, New Jersey. The route was engineered to be as geographically direct as practical, reducing the distance traveled by signals compared with conventional paths. Construction was reportedly carried out with a high degree of secrecy during its early stages so that competing network providers would not learn the plan before the line was ready. The project cost approximately $300 million according to the cited reference material, although that figure is a historical project-cost estimate rather than a current financial disclosure. The first line was unveiled in June 2010. Spread Networks marketed both dark-fiber access and managed wavelength services, alongside colocation or related facilities at locations along the route. Its connectivity was intended to provide low latency, high bandwidth, and high reliability. The company reported an estimated round-trip latency of about 13 milliseconds for its Chicago-to-Carteret dark-fiber path. Its wave services were somewhat slower, with reported round-trip times of roughly 14.1 to 14.2 milliseconds after improvements from earlier performance levels. The network’s commercial importance came from the economics of electronic trading rather than from mass-market internet access. A low-latency connection can allow a trading firm to receive price information or submit an order slightly earlier than a rival using a longer route. Spread Networks therefore became a frequently cited example of how financial-market competition had turned physical geography, fiber routing, data-center location, and signal propagation into strategic business assets. The project also attracted wider public attention through discussion of high-frequency trading, including coverage in Michael Lewis’s book Flash Boys: A Wall Street Revolt. After launching the core route, Spread Networks expanded its New Jersey presence. In 2011 it added connectivity or network locations at Equinix NY4 in Secaucus, 300 Boulevard East in Weehawken, and 165 Halsey Street in Newark. In October 2012 the company announced a latency improvement that reduced estimated round-trip time from 13.1 milliseconds to 12.98 milliseconds. In January 2014 it announced a point of presence at the NYSE Euronext trading center in Mahwah, New Jersey. On November 27, 2017, Zayo Group Holdings announced a definitive agreement to acquire Spread Networks for $127 million in cash. The acquisition placed the network within Zayo’s broader communications-infrastructure portfolio. Public reference material supplied for this dossier does not establish the company’s current standalone corporate…

Spread Networks emerged from the convergence of electronic trading and specialized communications infrastructure. Its founder, Dan Spivey, identified the opportunity in 2007 while developing an arbitrage strategy based on relationships between futures contracts traded in Chicago and underlying equities traded in New York. The strategy depended on receiving market information and transmitting orders quickly, but the available communications paths did not provide the lowest latency required for practical execution. Spivey consequently explored the feasibility of building a dedicated route and obtained financial backing from James L. Barksdale, formerly the chief executive of Netscape. The resulting project focused on a direct fiber-optic connection between the Chicago area and Carteret, New Jersey. Chicago was important because of its derivatives markets, particularly the Chicago Mercantile Exchange, while Carteret hosted a major Nasdaq data-center location. Rather than relying on an ordinary telecommunications route, Spread Networks designed an approximately 827-mile path intended to follow the shortest practical geography. The project reportedly cost about $300 million. Construction was conducted discreetly during its early phase, reflecting the commercial sensitivity of being first to offer a new low-latency route to financial firms. The initial line was unveiled in June 2010. Spread Networks offered dark fiber, allowing customers to control or dedicate their own optical equipment, as well as wavelength-based services. The network was promoted on three principal attributes: reduced latency, substantial bandwidth, and operational reliability. The company described continuous monitoring and regular testing of the route as part of its reliability approach. It also offered colocation or related server-access facilities in Chicago, Carteret, and Cleveland. The reported dark-fiber round-trip time between Chicago and Carteret was approximately 13 milliseconds. That represented a modest improvement over conventional fiber routes, but the difference had commercial value for high-frequency trading firms competing to act on market information. The network became emblematic of the physical infrastructure race surrounding electronic markets. Its business model showed that a communications company could monetize a very small speed advantage when customers traded large volumes in highly competitive markets. Spread Networks expanded its access points in 2011, adding locations at Equinix NY4 in Secaucus, 300 Boulevard East in Weehawken, and 165 Halsey Street in Newark. In October 2012 it announced that engineering or operational improvements had reduced estimated round-trip latency from 13.1 milliseconds to 12.98 milliseconds. In January 2014 it announced a point of presence at the NYSE Euronext trading center in Mahwah, extending its reach to another important trading location. The company’s technology also formed part of a broader debate about the limits of fiber optics. Because light travels more slowly through glass than through air, some competitors pursued microwave or other air-based transmission systems that could produce lower latency on suitable routes. Companies cited in discussions of the sector included McKay Brothers, Metrorede, and Tradeworx. Spread Networks nevertheless remained a prominent example of a purpose-built fiber route and of the infrastructure economics of high-frequency trading. The network received broader public exposure through writing about automated and high-frequency trading, including Michael Lewis’s Flash Boys: A Wall Street Revolt. This attention made Spread Networks recognizable beyond the telecommunications industry, although its customer base remained primarily institutional and financial rather than consumer-oriented. On November 27, 2017, Zayo Group Holdings announced a definitive agreement to buy Spread Networks for $127 million in cash. The transaction represented a strategic fit with Zayo’s portfolio of fiber and communications assets. The supplied reference material does not provide a later standalone operating history, named post-acquisition executives, or confirmation of the current status of the Spread Networks brand. Accordingly, the company’s post-acquisition identity is recorded conservatively.

• 2017

  Zayo acquisition agreement announced

  [1]Spread Networksen.wikipedia.org

  Zayo Group Holdings announced an agreement to acquire Spread Networks for $127 million in cash.

• 2014

  Mahwah point of presence announced

  [1]Spread Networksen.wikipedia.org

  Spread Networks opened a point of presence at the NYSE Euronext trading center in Mahwah, New Jersey.

• 2012

  Reported latency improved to 12.98 milliseconds

  [1]Spread Networksen.wikipedia.org

  Spread Networks announced a reduction in estimated round-trip latency from 13.1 milliseconds to 12.98 milliseconds.

• 2011

  New Jersey access points added

  [1]Spread Networksen.wikipedia.org

  The company expanded to Equinix NY4 in Secaucus, Weehawken, and Newark.

• 2010

  First Chicago–Carteret line unveiled

  [1]Spread Networksen.wikipedia.org

  Spread Networks unveiled its approximately 827-mile fiber line between Chicago and Carteret, New Jersey.

• 2009

  Construction proceeds on the initial route

  [1]Spread Networksen.wikipedia.org

  Construction of the direct fiber route was substantially under way and was reportedly kept secret to limit the risk of competitors copying the project.

• 2007

  Low-latency trading-network concept develops

  [1]Spread Networksen.wikipedia.org

  Dan Spivey developed the idea for a dedicated Chicago–New York financial-market connection after encountering latency constraints while working on an arbitrage strategy.

A specialized, infrastructure-led connectivity provider positioned around ultra-low-latency, high-bandwidth, and reliable communications for electronic trading and other latency-sensitive financial applications.

• Dark fiber · 2010

  Chicago–Carteret dark-fiber route

  Spread Networks’ signature infrastructure was an approximately 827-mile fiber-optic route connecting the Chicago financial market with Carteret, New Jersey. It was designed to follow a geographically direct path and provide a very small latency advantage over conventional routes. The service targeted trading firms and other customers whose operations depended on rapid transmission of market data and orders.

• Managed network service

  Wavelength services

  The company offered managed optical wavelength services over its route. These services provided dedicated high-bandwidth connectivity without requiring customers to operate a complete dark-fiber system. Reported round-trip times were approximately 14.1 to 14.2 milliseconds after improvements from earlier performance.

• Colocation

  Colocation and network-access facilities

  Spread Networks offered colocation or related server-access facilities at points including Chicago, Carteret, and Cleveland, with additional New Jersey access locations added over time. These facilities supported customers that needed to place equipment close to exchanges, data centers, or the company’s long-haul route.

• 2017

  Agreement to sell the company to ZayoM&A

  Background

  Zayo was expanding its portfolio of fiber and communications infrastructure assets.

  Action taken

  Zayo Group Holdings announced a definitive agreement to acquire Spread Networks for $127 million in cash.

  Aftermath

  Spread Networks became part of Zayo’s infrastructure portfolio; the supplied sources do not establish the subsequent standalone brand or operating structure.

  Acquisition consideration. $127 million cash purchase price (Announcement on November 27, 2017)

  Source

• 2012

  Latency optimizationGeneration change

  Background

  Small reductions in transmission time were commercially meaningful to the company’s trading-oriented customers.

  Action taken

  Spread Networks announced that estimated dark-fiber round-trip latency had improved from 13.1 milliseconds to 12.98 milliseconds.

  Aftermath

  The announcement reinforced the company’s positioning around incremental performance gains in financial-market networking.

  Source

• 2010

  Launch of the Chicago–Carteret low-latency routeProduct launch

  Background

  Electronic trading firms were seeking faster connections between Chicago derivatives markets and New York-area equity and exchange infrastructure.

  Action taken

  Spread Networks unveiled an approximately 827-mile direct fiber route and marketed dark-fiber and related connectivity services.

  Aftermath

  The route became a widely cited example of specialized infrastructure built around high-frequency trading and latency-sensitive market access.

  Source

1. 1Spread Networksen.wikipedia.org