Synchronicity Gets Kicked Down the Road

A recent latency monitoring survey of the STAC Benchmark Council published by the Securities Technology Analysis Center (STAC), found that 50 percent of the respondents do not expect to have a viable time-synchronization strategy for the next two years.

Such results are definitely putting the consolidated audit trail proposed by the US Securities and Exchange Commission (SEC) for later this year in serious jeopardy, since it would require the self-regulatory organizations (SROs) and their clients to synchronize their "business clocks."

Synchronizing one's infrastructure is difficult enough but there are several hurdles a firm faces when trying to synchronize to systems on the other side of their firewalls.

I'm sure one of the prime concerns for the industry is the lack of the available technology to enable server-clock synchronization. It was only relatively recently that server vendors began shipping boxes that were capable of supporting the Precision Time Protocol (PTP) from the Institute of Electrical and Electronic Engineers (IEEE). It will be awhile before PTP-enabled hardware gets deployed throughout organizations.

Although the SEC's proposal sounds as if the regulator expects that each SRO and its clients will have dedicated systems that could be easily synchronized, the best argument against it is all the co-location facilities in Northern New Jersey.

Take a look at the two most recent exchanges that have set up shop in Equinix's NY4 datacenter in Secaucus, NJ. How many brokerages co-locate in these sorts of facilities in order to get the biggest bang for their cross-connect buck? Now, it's not an issue of a broker synchronizing its system to one exchange, but to multiple exchanges simultaneously. The complexity of the task has just jumped several scales of magnitude.

The industry taking the next two years to figure out how to accomplish this task strikes me as a bit optimistic.