What Is a Microsecond Worth?
At STAC Lab's Performance Summit last night in New York, I kept thinking about a scene from Mel Brooks’ “Spaceballs” film, when the evil empire's space cruiser decides to enter "ludicrous speed" in an attempt to overtake the heroes who are only traveling at light speed.
Has the industry hit ludicrous speeds yet? Sometimes in the latency arms race, it seems that way.
A representative from a network provider who attended the STAC conference explained that one recent deal hinged on whether the vendor could shave 27 microseconds off the client's connection time. Equipment vendors pitching their wares cited transmission and routing equipment functions in the microseconds, and latency-monitoring vendors are already comfortably discussing nanoseconds. In 18 months, we could be talking in picoseconds.
If you are the fastest then you have a license to print money, but how much are firms investing to be the fastest and how long can they hold that title?
Having the fastest connection between Point A and Point B is good when there is only one liquidity pool, as is the case in the futures markets, where traders can latency-arbitrage the market all day long.
But the issue now is how to mix fast and smart and be the best at both. When firms start trading in fungible instruments, such as cash equities and foreign exchange (FX), they have to layer in the latency of smart order routing (SOR) so they can track the best prices across multiple venues and route orders accordingly.
Finding the proper balance between these two variables will be the challenge going forward. Systems will need to be fast enough to hit the quote and smart enough to know the location of the best quote.
Has the industry mastered this alchemy yet?
Send me your thoughts at rob.daly@incisivemedia.com.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Liquidnet sees electronic future for gray bond trading
TP Icap’s gray market bond trading unit has more than doubled transactions in the first quarter of 2024.
This Week: HKEx's new derivatives platform; GoldenSource; Quonian-SimCorp, and more
A summary of some of the latest financial technology news.
Chris Edmonds takes the reins at ICE Fixed Income and Data Services
Edmonds is now leading ICE’s fixed income and data business as the rush to provide better data and analytics in fixed income builds.
Systematic tools gain favor in fixed income
Automation is enabling systematic strategies in fixed income that were previously reserved for equities trading. The tech gap between the two may be closing, but differences remain.
Waters Wrap: Examining the changing EMS landscape
After LSEG’s decision to sunset Redi, Anthony examines what might lie ahead for the EMS space.
This Week: Clear Street, AXA/AWS, TD Bank/Google Cloud and more
A summary of the latest financial technology news.
LSEG to sunset Redi EMS in favor of Tora
Sources say competitors will look to seize on the decision to win over Redi’s sizeable US client base.
Most read
- Chris Edmonds takes the reins at ICE Fixed Income and Data Services
- Deutsche Börse democratizes data with Marketplace offering
- Waters Wavelength Podcast: Broadridge’s Joseph Lo on GPTs