The New Financial Data Network: Speeding Towards More Profitable Trading
If you want to get ahead, get faster. This is the lesson that successful algorithmic trading, and high frequency trading in particular, has taught us. Every microsecond – and now even nanosecond – counts as trading firms compete and high frequency trading hits the news headlines. Firms are also competing over a limited number of ‘preferred liquidity destinations’ as a turf war breaks out to ensure that trading platforms are optimally connected to exchanges housed inside data centers at premier Manhattan and New Jersey addresses.
With so much at stake, what kind of data communications network enables the fastest, most effective execution of algorithmic trades? How can your firm leapfrog others in the race to better competitive positioning and the increased profitability it brings?
Speed counts for more than just low latency. Reliable low latency networks – those that are optimized to have the least possible delay between one point and another – are important, but they have become table stakes. Optimum Lightpath recently commissioned an independent study to understand the changing telecommunications needs of the financial services market. We talked to firms both large and small and what we heard most often was that low latency is a requirement for electronic trading. But interestingly, with so many network service providers out there promising a low latency network, installation intervals have emerged as one of the important factors in your selection of a service provider.
The installation interval is the time it takes from signing a contract for a new low latency circuit to be provisioned, tested and then turned on by the service provider. This interval is effectively the time that must elapse before your organization can take advantage of a new low latency trading route and the extra profitability it can offer. So, it’s key that not only is the installation interval as rapid as possible, but also that the quote offered by the service provider for the interval is realistic and reflects the level of service they can deliver.
A good installation interval figure for most of the key routes in Manhattan, for example, might be 20 days. But that figure represents a financial risk if it’s not backed by outstanding execution in a situation where unexpected problems can arise at street level or with network equipment when commissioning a route. Service providers realize this and are striving to drive down their installation interval times in order to win your business. They’re also constantly streamlining their networks to offer even lower latency in order to give you a greater financial advantage.
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