multilateral trading facilities (MTFs) -- the systems established under the Markets in Financial Instruments Directive (MiFID) that bring together buyers and sellers of financial instruments -- have partnered with Reliance Globalcom's financial extranet to reach buy- and sell-side firms around the world. Last week Reliance Globalcom announced that Chi-X Europe, Nasdaq OMX Europe and BATS Europe now can be accessed through Yipes FinancialConnect!, its Ethernet-based financial extranet that provides low-latency connectivity to exchanges and trading platforms.
"Low latency is key in this evolving European MTF marketplace," says Hirander Misra, COO of Chi-X Europe, a consortium-owned pan-European equities MTF platform. "Reliance Globalcom has dark fiber low-latency connectivity. Dark fiber is the quickest connectivity between two points." According to Misra, Chi-X is using the extranet to disseminate market data as well as to receive orders.
For Chi-X Europe -- which already trades stocks from the leading indices in the British, Dutch, German and French markets as well as many others and is rapidly expanding to new markets, such as Spain -- leveraging the FinancialConnect extranet allows the MTF's customers to access far-reaching markets and liquidity in a very low-cost manner, Misra explains.
Currently the FinancialConnect network features about 80 or 90 destinations, including exchanges and trading platforms, and hundreds of buy- and sell-side firms around the world, according to Keao Caindec, Reliance Globalcom's chief marketing officer. "As liquidity grows and the market data feeds grow from MTFs, the traders need to upgrade pretty quickly, especially to get the uncompressed data feed," he says. "As more traders trade and the liquidity increases, the overall trading volume increases, and as the speed improves, traders can trade more."
Market Data Explosion
Despite the global market downturn and the shuttering of many hedge funds, Chi-X anticipates an explosion in market data message rates, relates the company's Misra. As such, "Having an optimal network to handle the growth of the market is key," he emphasizes.
While Chi-X Europe's internal matching engine can match orders with an internal latency rate of 550 microseconds, which is less than half a millisecond, distributing its data on a network can add latency, Misra continues. "The good thing about the dark fiber connectivity that Reliance Globalcom offers is that the market data can be disseminated out to the market globally in the lowest latency possible, which means orders coming into the MTF can enter the MTF quickly as well," he explains, noting that this is very important to high-frequency trading firms and algorithmic traders. "Low latency is key to their trading and analytical decisions and to be in line with the market."
According to Misra, Chi-X Europe's systems process messages at a throughput rate of 115,000 messages per second, "without degradation in performance, which is what we call optimum performance." (These messages include market data updates, instructions to buy or sell equities, cancel orders, etc.) But adequate bandwidth is necessary to send those messages to and from the Chi-X platform, he notes. "Reliance Globalcom, with the investment it's made, can ensure adequate bandwidth on the network as Chi-X's data levels grow," Misra asserts.
Nonetheless, he points out, Chi-X is vendor-neutral and connects to a dozen different networks, including BT, AboveNet, Atrium Network, Colt, EU Network, Orange Business Services, Savvis, Verizon, TNX and Fixnetix. (The full connectivity partners list is available on Chi-X's Web site.)
"We run a superfast, super-cheap MTF platform," Misra says. "We're more than network providers, and there are plenty of specialized players in that space already that have made the investment and offer a very complementary business model."
Over the past year Reliance Globalcom has acquired two companies, Yipes in San Francisco and Vanco in London, to become one of the world's largest global telecom providers, according to the company's Caindec. It is now the largest undersea operator of cable systems that run between Europe and the United States, and India and Southeast Asia and Africa, he claims.
Meanwhile the vendor continues to work with many MTFs and plans to add others, which could include the consortium-owned Turquoise. "One of the reasons we're announcing these three is just [to relate the] demand we're seeing from our customers as well as the willingness of these MTFs to move quickly," says Caindec.
Chi-X's Misra says he doesn't mind all the MTF competitors being on the same networks. "MTFs in that space will compete hard on service, innovation and price," he predicts.