Forex - MoneyShow.com

FEATURES
centre providers such as Equinix are leading suppliers
who provide space, power and connectivity both in and
out of their data centre facilities, as well as among
tenants housed or colocated within their facilities.
Recently, other companies specializing in capital
markets centered proximity services have come to the
market, such as Telx. Similar to Equinix, Telx offers
financial companies and their networks access to a
variety communications and exchange platforms
located within their colocation centres.
Equinix and Telx along with the exchanges and many
other venues, tout their advantages of proximity as it
relates to the lower latency they can provide from a
wide variety of network providers. However, this is
where navigating the mine field could make a
tremendous difference for trading firms of all types.
Going the distance
Proximity to financial exchange platforms is of
ultimate importance when measuring latency in
capital markets. It’s the simple rule of physics that
dictate distance equals latency, and in capital markets
latency equals loss. Eliminating latency is core, so
eliminating distance is the first step. If we took out a
yard stick to measure network latency, no doubt the
shortest path would win and in capital markets, that
could equate to millions of dollars.
For many years, the global telecommunications
industry has been measuring its network latency and
selling Service Level Assurances (SLAs) on the
differences based on these numbers. Most networks
measure latency capability based on bandwidth,
which is simply the maximum rate of data that can
flow through a specific media type.
Lighting the Way
Once a path has been determined and latency in
distance agreed upon, the network must be “lit” with
network services. So let’s talk capacity first. Pure
bandwidth is the actual ‘size of the pipe.’ Companies
can simply calculate how many data bytes and
messages can cross a line. The calculations are based
on the size of the market data and order message rates
for example; Nasdaq, NYSE, BATS, Direct Edge and
all the US Equities exchanges in the US are about 1
million messages per second.
If there was no distance from the source to the
consumer server, than a 1 Gig pipe would be 1
microsecond. The more information on the pipe, the
54 | january 2010 e-FOREX
>>>
larger the pipe needs to be in order to be as fast. The
further the distance, the larger the “lit” pipe to
accommodate packet and message rates divided by
distance to show the lowest possible latency.
Gearing Up
With microseconds driving all decisions for financial
institutions, choosing which network equipment and
which provider to deploy are often million dollar
decisions. Often, it’s the technology situated in the
various network Points of Presence (PoPs) that can
reduce or increase network latency and more money can
be spent at solving unrelated problems. Equipment,
technology, switches, routers and ensuring redundancy
and security among these key IT network components
can be the differentiating factors behind a network’s
viability in supporting proximity trading solutions.
Living in a connected world
Most financial networks require interconnectivity in a
number of locations in order to leverage proximity
trading with the Financial Exchanges. Many of the
key locations are within major cities such as Chicago,
New York, London, Paris and Frankfurt. For
example, the Chi-X Europe Platform connects
companies to multiple financial trading platforms. As
of today, Chi-X has over 100 trading participants
with access to over 1000 of the most liquid stocks,
ETFs and ETCs across 14 European markets.
Companies colocated within close proximity to the
Chi-X have measured a mean latency of 0.4
milliseconds to access other participant networks on
the platform. This type of speed is hard to beat, as
transactions are seemingly completed in real-time.
Security through diversity
With increased trends toward high frequency and
algorithmic trading, proximity and interconnectivity
to only one trading venue will not provide the
financial gain required to stay ahead. Companies
must connect to multiple financial trading exchanges
in multiple markets – which mean finding a secure
and diverse network provider that can quickly and
efficiently construct and implement custom network
solutions, bringing companies to the ‘safe’ zone in the
mine field.
For example, Hibernia Atlantic is the largest privately
held, US-owned, diverse Transatlantic submarine
provider. Hibernia is dedicated to what it calls
‘Security though Diversity‘ on its network. Realizing
that most networks enter North America and Europe