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THE FINANCIAL MARKETS WANT ROBUST SECURE NETWORKS WHICH OPERATE AT EVER FASTER SPEEDS.

CAROLINE CHAPPELL LOOKS AT THE PRODUCTS AND SERVICES CARRIERS ARE USING TO MEET THE CHALLENGE

Parts of the financial market may be in

meltdown but overall, sector demand for

bandwidth is higher than ever with market

volatility contributing to increasing

requirements for capacity. Rising numbers of

bandwidth-hungry financial applications

continue to be rolled out across the world,

whether these are algorithmic trading systems

in the planet’s most sophisticated trading

centres or ATMs in rural Africa (see box p24).

Changes to the structure of the equity

market are also driving demand for more

connectivity. The number of equity market

players is growing due to changes in

regulation: the new EU directive, MiFID,

Europe’s answer to the US’s “best execution

policy, RegNMS, is creating a level playing field

on which new trading venues with faster,

greenfield trading platforms can take on the

established exchanges and is opening up the market to increased competition

across national boundaries. John Panzica, general manager, global financial markets

at Reliance Globalcom, points out that around 11 new European exchanges, such

as Chi-X, are either trading now or will become operational by the end of the year.

New entrants need connectivity and they are looking for the most advanced

solutions, typically low latency, GigE services. “A number of unthrottled market data

feeds can experience 100Mb spikes depending on market trading,” Panzica says.

“Ethernet provides scaleable, low latency connectivity.”

TOWARDS ZERO LATENCY

As Joe Weinman, AT&T’s strategic solutions sales, vice president, summarises: “If

there is one overarching theme in the financial sector at the moment, it’s velocity,

whether you’re talking about the brokerage sector wanting access to market data

quicker to speed up decision making or about retail banks wanting to give customers

instant electronic access to their account information and functions, or insurance

companies using video services to accelerate claims processing.” Nowhere is

velocity more important than in the equity trading sector, where a few milliseconds,

and increasingly microseconds, can make huge differences to the amounts of money

a company can make on a trade. “Latency is the top requirement,” says Mark

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Cooper, business development manager, Exponential-e. “Over the past couple of

years, we’ve seen customers bringing their requirements for a complete trading cycle

down from around 100ms to 5-6ms so the networks underpinning their

infrastructures need to be very fast.” Bill LaPerch, CEO of Abovenet, elaborates: “Our

financial customers’ goal on a circuit is a latency of zero. They are looking for latencies

in the 1-2ms range and even that is a significant overhead for financial networks.”

And in an increasingly best-execution-obsessed market, latency measurement

company, Endace, is seeing increasing interest from service providers in its accurateto-the-nanosecond

technology, so that they can demonstrate their network

performance to customers.

While technologies in their infancy like Infiniband (see box p22) do get close

to zero latency over short distances today, in the metro, and increasingly the

international backbone, network, the low latency transport of choice is Ethernet.

Exponential-e’s Ethernet network “only adds 1ms to the trading cycle anywhere

in London,” Cooper says. And international carriers confirm the trend. “We are

seeing a definite swing to Ethernet both as an access mechanism to MPLS networks

and as a point to point service across the single global playing field the financial

market is now becoming,” comments Steve Hewson, vice president operations

and technology – Europe, Verizon Business. “We typically sold 10Gb private-line

services in metro locations – now we have our first 10Gb services operational

between London and Frankfurt, thanks to Verizon’s investment in ULH (ultra longhaul)

technology.”

INCREASED INVESTMENT

In fact, the telecoms market is awash with investment to meet rising capacity, and

specifically Ethernet capacity, demand from financial customers round the globe.

Weinman points out that AT&T’s massive 2008 capex spend of more than $20 billion

is all about extending the company’s connectivity and capacity worldwide, much

of it with the financial industry in mind. As LaPerch points out: “Over the past

12 months, we’ve seen customers with 1-2.5Gb access requirements start to

order 10Gb services and we expect this

migration to continue over the next three

years.” Reliance Globecom is the latest carrier

to respond to this demand, recently

completing a 10Gb infrastructure upgrade in

New York, its highest volume market. Verizon

is investing in a host of new networking

technologies in its network worldwide, from

ULH and ROADMs (the latter have been

deployed in its City of London metro network

over the past year) to mesh architecture

across its submarine cables, to boost speed,

cost efficiency, reliability and resilience,

increasing Verizon’s appeal to financial

customers worldwide.

There is ongoing investment in other types

of solution, too. Carriers want to add value to

the services they offer financial customers –

no longer is the market all about supplying

dark fibre to technology-savvy institutions so

that they can build their own, proprietary

networks. Market dynamics and the velocity of

technology change are forcing financial firms

to take a long hard look at the economics of

outsourcing and managed services: “We’re

seeing more of a thirst in the financial sector

for outsourcing and out-tasking as well as for

consolidating the number of suppliers

companies have worldwide,” Hewson says.

Joe Gallagher, head of telecommunications at

KPMG adds: “Financial companies are looking

for partners with which they can build a longterm,

trusted relationship, which are prepared

to engage with financial institutions to

understand their technical requirements round

security and performance.”

MANAGED SERVICES

BT and AT&T are already established

managed service providers – BT’s Radianz

Shared Market Infrastructure connects around

10,500 players in the financial value chain

worldwide and on top of this, BT Global

Financial Services has added Radianz

Proximity Solution and Radianz Ultra

Access, both orientated towards extremely

low latency connectivity. Ultra Access has

been engineered end-to-end, including

processes and equipment, to provide sub-

1ms connections to seven exchanges in the

New York area and the service will also be

rolled out in London and Chicago at some

point. AT&T’s Ultravailable Network metro

DWDM service supports the synchronised

mirroring of data centres and data centre

hosting and disaster recovery/business

continuity services are an outsourcing

opportunity being picked up on by a newer

player on the block, Global Crossing. Global

Crossing is deploying into Europe and

eventually the US market, the robust set of

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data centre capabilities it picked up with its

acquisition of Impsat in Latin America. Services

provided by the carrier’s Latin American-based

data centres have been certified by the

financial regulators in the countries in which

they are based. The data centres provide, for

example, managed applications, such as SAP,

to investment banks in the region as well as

hosting retail banking applications. The data

centres are also using Global Crossing’s high

performance connectivity capabilities to

provide business continuity services.

AT&T is hoping its new Telepresence

solution, launched in April this year, will gain a

significant following in the financial sector. The

solution supports Weinman’s theme of velocity,

enabling financial executives to meet one

“Market data feeds can experience

100Mb spikes depending on

market trading”

JOHN PANZICA

GM, GLOBAL FINANCIAL MARKETS, RELIANCE GLOBALCOM

another in a highly realistic virtual “meeting room” without the time delays of overseas

travel. The session border controllers and multipoint conference controllers

supporting the solution are hosted in the AT&T “cloud”, so joining a telepresence

meeting is little different than setting up a conference bridge, although at between

$10,000 and $20,000 a month for a 50Mb metro Ethernet or DS3 or equivalent end

point – depending on configuration and geography – considerably more expensive. In

terms of financial company travel budgets and productivity losses, however,

Weinman thinks the solution offers good value.

TO INFINIBAND AND BEYOND – LOW-LATENCY CONNECTIVITY

Financial institutions are beginning to pick up on Infiniband, a low latency, zero-packet loss networking architecture for interconnecting

very high speed computing nodes. Infiniband has emerged in the research community to support the clustering of supercomputers for

large-scale computations: dedicated Infiniband devices talk directly to the memory and processors of computing devices, replacing

network cards that sit on a shared PCI bus, and so can deliver much lower latency and higher throughput than conventional Ethernet

connections. Infiniband has also been designed not to drop packets, so there is no need to resend data, also contributing to lower latency

delivery. Nearly half of the world’s supercomputers use Infiniband-based interconnects, and now financial institutions are beginning to

investigate Infiniband too, to connect their algorithmic trading platforms to trading desks in order to gain millisecond and even microsecond

advantages in trading.

Infiniband typically connects computers in the same data centre or room. Christian Illmer, senior director business development,

enterprise, at ADVA Optical Networking, says the research community is showing little interest in using the technology over longer

distances. However, given the cost of floor space on trading floors in New York, for example, financial institutions are beginning to look at

ways of carrying out trading computations in a cheaper location, delivering the results with the lowest latency possible to the trading floor.

Adva Optical is at the forefront of developments to deliver Infiniband over metro optical (WDM) networks and has demonstrated Infiniband

working over a distance of 50km.

Infiniband has a long way to go to become a mainstream technology – if it ever does. Infiniband requires dedicated infrastructure that is

expensive at present, transport over the wide area is in its infancy and there is a problem with its data rates – the protocol supports 2.5Gb,

5Gb and 10Gb data rates, and the consortia responsible for developing Infiniband are working on a 40Gb version, but what Infiniband

understands as a 10Gb date rate, for example, doesn’t match 10Gb data rates supported by Ethernet and SDH/Sonet. Illmer says data

rate mapping techniques could be developed if there is market demand – a moot point at the moment. Adva Optical’s recent demonstration

of Infiniband working in a metro environment is designed to showcase the potential of the technology in the hope of stimulating a new

generation of low latency applications. Whether there is a requirement for almost zero latency connectivity over long distances outside the

financial sector remains to be seen. In any case, Illmer sees financial institutions implementing Infiniband for themselves for specific high

value purposes over private WDM networks rather than expecting carriers to offer Infiniband-based managed services. Nevertheless, BT’s

Cooper calls Infiniband “worth watching” and Illmer likens the position of Infiniband today to fibre channel five or six years ago. “Then, fibre

channel was in its infancy, there was little equipment support and no one knew how to support it over long distances. Today, carriers

routinely support this,” Illmer says.

Infiniband may only have a two to three-year window of opportunity before Ethernet developments, both carrier class Ethernet and data

centre Ethernet (a variant known as Converged Enhanced Ethernet) ensure that the familiar, standards-based technology delivers

equivalent characteristics: low latency and zero packet loss. Time will tell where the financial market will put its money. ■

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COST-EFFECTIVE?

Other service providers are following BT’s and

AT&T’s lead in signing up as many financial

players as possible to “extranets” dedicated to

the finance community, with performance,

security and resilience characteristics tuned to

the community’s requirements. Reliance

Globalcom now boasts 400 firms, including 85

exchanges connected to its global extranet;

Exponential-e has around 150 financial players

on its network and extols the further benefits of

Ethernet in the context of connection to industry

partners: “As customers need to access a

number of different trading systems to execute

their best execution strategy, Ethernet access is

cost-effective – we provide multiple VLANs

down a single access pipe and if the trading

partner is already connected to our network,

it’s very quick to configure a new VLAN,”

Cooper says.

Not surprisingly, both metro and international

“The industry wants more

bandwidth at higher speeds,

lower latency and cheaper prices”

BILL LAPERCH

CEO, ABOVENET

carriers describe their financial sector businesses as healthy and a continued

source of opportunity. However, they also recognise that the financial industry’s

continuing requirements for “more bandwidth at higher speeds, lower latency

and cheaper prices,” as LaPerch summarises it, is putting significant pressure

on them to extend their footprints, whether in metro, national or international markets,

and to keep abreast, if not ahead, of fast-evolving network technologies. “The cost of

an international financial player maintaining its own global network in-house is

enormous,” Gallagher points out, and increasingly, large financial institutions will want

to offload that cost on a carrier partner. A highly competitive market segment is set to

become even more competitive and only advanced and agile carriers with deep

pockets and in-depth understanding of sector requirements are likely to continue to

supply it. ■

OUT IN AFRICA

The gulf between supporting the sophisticated world of algorithmic trading in the world’s top financial centres and enabling banking in

rural Africa is immense, but Gateway Communications is finding the latter market a fruitful source of revenue. “Regulators are pushing for

the consolidation and recapitalisation of local banks and the sector is becoming reasonably healthy,” says Steve Chapman, Gateway’s

commercial director, business services. As a result: “There’s an explosion in retail banking across the continent and banks are building

thousands of high street branches at the moment.” ong>Bankingong> services in many parts of Africa, apart from South Africa, may resemble the

situation in Europe 20 years ago, but a number of banks, particularly in Nigeria, are taking advantage of the fact that they are greenfield

sites and investing in the latest banking technology.

The roll-out of central banking applications is underway, leading to a high demand for hub and spoke connectivity between branches

and central offices, as well as regional connectivity, since national regulation requires customer account information to remain on servers

in-country but at a consolidated level, information needs to be backhauled to a bank’s regional headquarters. Gateway typically provides

VSAT-based connectivity solutions between branches and head offices but it is also migrating customers to MPLS VPN solutions using

capacity on long distance fibre optic backbone networks which are slowly being built out by African mobile operators rather than cashstrapped

PTTs. Prices are high, Chapman confirms, but Gateway is expecting a major reduction in the cost of bandwidth when the new

submarine cables down the east and west coasts of Africa come onstream in 2009/2010. Most banks connect their rural branches using

128K or 256K connections or E1s in major cities, but as they make more use of sophisticated banking applications and bring new ATM

networks onstream, Chapman is seeing their data usage ramp up very fast. “They are just beginning to ask for more connectivity,” he

points out. Gateway is also seeing early demand for large scale voice and data infrastructures to support call centres which are migrating

to African countries, such as South Africa, from India. This is expected to be a growth business for the carrier over the next two years.

Internet banking is currently in its infancy outside South Africa given the lack of infrastructure – and IP-VPN services are a non-starter – but

Chapman expects electronic banking to start taking off in Africa, with the mobile phone as the terminal of choice.

“Ten years ago, oil, gas and minerals drove our business. Now we see double the demand coming from the financial sector,”

Chapman comments. ■

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