In the summer of 2009, Dan Spivey initiated a covert project to establish a direct fiber optic connection between a data center in Chicago and a stock exchange in northern New Jersey. The project, funded by Jim Barksdale, former CEO of Netscape Communications, was named Spread Networks. The company offered a fiber optic cable that allowed a signal to achieve a round-trip travel time of 13 milliseconds, significantly faster than existing telecom carriers. This speed advantage was marketed to Wall Street traders, with a five-year lease costing $14 million. The appeal of this service was rooted in the concept of arbitrage, where traders could profit from the slight time advantage in buying and selling across different markets.
In 2009, ex-options trader Dan Spivey embarked on a covert project to connect a Chicago data center to a northern New Jersey stock exchange via a fiber optic cable. Unlike the standard route that largely followed railway tracks, Spivey's cable was to be laid in the most direct route, even if it meant tunneling through the Allegheny Mountains. Funded by Jim Barksdale, former CEO of Netscape Communications, the $300 million project was kept secret until March 2010, three months before completion. The company, named Spread Networks, offered Wall Street traders access to this line for $14 million for a five-year lease. With a capacity of 200 users, the fully sold line could generate $2.8 billion in revenue. The unique selling point was the cable's ability to achieve a Chicago to New Jersey round-trip signal travel time of 13 milliseconds, significantly faster than existing telecom carriers. The reason Wall Street traders and banks were willing to pay such a premium for a few milliseconds advantage was due to the concept of arbitrage. Traders could buy something in one market at a certain price and immediately sell it in another market for a higher price. The speed of transactions, no longer limited by human intervention, was now only constrained by how fast an electronic signal could travel between the Chicago Mercantile Exchange and the NASDAQ’s stock exchange in Carteret, New Jersey. This new high-speed fiber optic line was a game changer, enabling traders to react faster than the rest of the stock market. Despite the high cost, traders had no choice but to pay the $14 million Spread Networks was asking to maintain their competitive edge.
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