Latency special report

Click here to download the PDF
Speed Is Nothing Without Control
Since trading firms first realized there was an advantage to be gained by being able to capture market data and trade faster than their rivals, an arms race has been underway to see who could engineer the fastest and most efficient trading infrastructure with as little latency as possible.
First, firms turned to direct datafeeds, captured using low-latency ticker plants, encouraging exchanges to distribute their feeds even faster. Then firms implemented low-latency messaging layers to distribute that fast data throughout their organizations, which in turn placed pressure on vendors to streamline their technology and eliminate even the slightest trace of latency. This turned the industry's attention to hardware-based technologies that function faster than software, and eliminating network layers altogether by moving trading servers into proximity hosting datacenters close to exchanges, and ultimately into the same facilities as exchange matching engines, spawning a wave of megadatecenters, such as those being built by NYSE Euronext, CME Group and the Singapore Exchange.
But as low latency becomes ever-more important, it also becomes harder to achieve. Saving milliseconds a few years ago was easier than saving microseconds or nanoseconds today, and firms are using sophisticated timestamping and measurement tools to monitor latency at the most granular level possible-in some cases, allowing them to generate microsecond improvements overall by eking out nanoseconds here and there. In addition, firms looking for end-to-end views of latency are also demanding transparency into the delays introduced by links in the chain outside of their control, such as trading venues themselves, prompting exchanges to roll out their own latency monitoring solutions, to provide members with statistics such as order-to-trade and tradeto- tape latency, and where a firm's overall roundtrip latency stands in relation to its peers.
Simply put, those who can't measure their performance can't perform, and will have to look elsewhere for trading advantage. But how long can it be before latency is exhausted as a competitive differentiator? Ultimately, this arms race is limited by light speed and the laws of physics. And perhaps in turn, those firms that can't compete on latency will have the upper hand when the rest of the industry gives up battling over picoseconds and femtoseconds. But according to the participants in this report, there's still a long way to go before we need to worry about that.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
M&A activity, syndicated loans, a new tariff tool, and more
The Waters Cooler: LSEG and LeveL Markets partner for new order type, QuantHouse gets sold to Baha Tech, and Fitch Ratings has a new interactive tool in this week’s news roundup.
Nasdaq, AWS offer cloud exchange in a box for regional venues
The companies will leverage the experience gained from their relationship to provide an expanded range of services, including cloud and AI capabilities, to other market operators.
Bank of America reduces, reuses, and recycles tech for markets division
Voice of the CTO: When it comes to the old build, buy, or borrow debate, Ashok Krishnan and his team are increasingly leaning into repurposing tech that is tried and true.
Crypto exchange EDX takes its tech into its own hands
The crypto exchange and clearinghouse, founded in 2022 by industry heavyweights, has built out its technology to meet the needs of the institutional market. In the process, it has learned important lessons about partnering with vendors, building in-house, and, ultimately, control.
FCA sets up shop in US, asset managers collab, M&A heats up, and more
The Waters Cooler: Nasdaq and Bruce ATS partner for overnight market data, Osttra gets sold to KKR, and the SEC takes on DOGE in this week’s news roundup.
EMS vendors address FX options workflow bottlenecks
Volatility is driving more buy-side interest in automating exercises and allocations.
BNP Paribas explores GenAI for securities services business
The bank recently released a new web app for its client portal to modernize its tech stack.
Treasury selloff challenges back-office systems, datafeeds
FIS and Trading Technologies suffered downtime during peak activity.