BATS Exchange announced it's become the latest exchange operator to use Correlix's RaceTeam latency monitoring service, an arrangement it says will enable clients to get a clearer view of their strategies' performance in various markets.
The addition of BATS further tightens Correlix's grip on the U.S. latency monitoring market with a stable of customers that includes Direct Edge, Nasdaq and the Chicago Board Options Exchange. In January the company inked a similar deal with NYSE Euronext.
BATS officials say it made the move to provide an independent view of each of its U.S.-based markets, including the equities exchanges BZX and BYX, along with BATS Options. "Providing the trading community with innovative latency tools such as this enables them to optimize their trading strategies and improve their execution," says Chris Isaacson, BATS COO, in a press statement.
When traders execute on a particular venue, their orders must first enter through a gateway before hitting the market. RaceTeam is designed to help traders locate the quickest possible gateway. The platform is also built to help high-frequency traders gauge how aggressive their strategies should be based on how latency conditions change throughout the day.
Correlix founder and chief technology officer Shawn Melamed tells Advanced Trading, "If I'm a BATS customer or market maker, I might use this information to adjust the spread I'm creating on the market."
Under the arrangement, BATS says Correlix will provide latency data as a supplement to an internal monitoring platform it rolled out earlier this year. Melamed says RaceTeam will allow traders executing on BATS to also view the latency performance of every major U.S. equities market.
"If you're trading on BATS and you're trying to troubleshoot or understand an issue with BATS, you can use their tool," Melamed explains. "If a customer wants to see how BATS behaves versus another market and make sure the data is objectively verified and measured the way it is in other markets, then they can look at Correlix."
The fragmentation of the U.S. equity markets has been a boon for Correlix, Melamed contends, since services like RaceTeam are necessary for traders who are looking to build strategies that can quickly adapt from one liquidity pool to the next.
"They need to understand the behavior of latency in order to create a finely tuned, predictable strategy for each of those venues," says Melamed. "Now you have to trade on all the venues since for the sell-side the best price could be in any of them. For the buy-side you're probably leveraging fragmentation to do cross-venue trading."
Now that Correlix monitors all exchange-traded volume in the U.S., and is close to reaching the same milestone in the nation's options market, Melamed says the the firm is looking to branch out into other asset classes.
"We see the futures, FX and fixed income markets growing, and the volume of high-frequency traders growing in those asset classes," Melamed predicts. "We also have a very good model in U.S equities and options and are looking to replicate that in emerging markets." As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio