Deploying Proximity Hosting for Achieving ultra-low latency FX >>>
relates to arbitrage opportunities, as one can pick up a information and knowledge, their business would
time advantage on one market where you have a high- gravitate to those that have the fastest feeds.”
speed access, go into another market where you also
have a high-speed access, and arbitrage against other Following some £3m worth of investment by
market participants who have slower access.” Exponential-e aimed, increasingly in 2009, at the FX
market, Wade adds: “We can’t write algorithms for you
He adds: “One might be going into one currency - [trading firms], but we can certainly ensure that the feed
buying cheap - and arbitraging it off into another that you buy from us is one of the fastest [in the UK]
that money can buy.”market place and selling it dear. Effectively you are
picking up deals faster on one side and able to lay
In particular, Wade cites the significant competitivethem off on the other side as arbitrage, before people
edge Exponential-e has with a Next Generationwho you are laying it off to have seen what you have
Network (NGN) in place, namely a 10 gigabit (layer 2done in the first market.”
network) around London. Certain incumbent providers
are based on legacy or layer 3 networks, which useIf a trader is going from a different city or country
routers that slow things down. (A layer 2 network isand there is a roundtrip delay of perhaps 25ms, you
entirely switched and thereby offers competitive edge).are 25 orders behind the fastest guy who might only
have 1ms latency and slicing up orders. “That’s like
The London-based provider claims that they havedriving with the brakes on,” Pickles says.
number of USPs that alter the balance of advantage
for FX traders. Specifically, in the FX space,Mukesh Bavisi, Exponential-e’s engineering and
Exponential-e is matching currency pairs to primarynetworks director, who is working to build out the
trading cities (e.g. London-Chicago, London-Newprovider’s FX trading platform, says: “When we as a
York), and publishing a latency table on its website infirm talk about proximity hosting we are referring to
order to foster greater transparency and assist marketthe situation where the client’s equipment is actually
participants (see: www.finance.exponential-e.com).residing in the same data facility as the matching
engine of the venue they are trying to reach.” The vendor, with a Point-of-Presence (POP) in
Chicago, is able to connect clients through“We define proximity hosting as typically a small
relationships to a number of major FX tradingcross-connect of under 100 meters, connecting the
venues, and has 28 POPs in and around London toclient's equipment to the exchange or their matching
ensure that the last mile is as short as possible goingengines,” he says.
into FX trading firms.
Bavisi feels that proximity hosting should also be “Our London to Frankfurt route is currently 12
considered on the network and not just on the actual milliseconds (ms),” says Wade. “But the new link we’ve
server equipment sitting next to the matching engine. invested in will perform a roundtrip in just 10.4ms.”
“There is standard proximity hosting but there is also This is from the heart of the London financial district
proximity hosting in terms of the network, i.e. getting to the heart of Frankfurt’s financial district.
the network as close to the customer as possible to
reduce that latency as well, which is what we always Equinix has had success in the U.S. in attracting FX
aim to do.” trading communities around its data centres in
Chicago and New York and is now expanding inOther requirements within trading facilities such as
Europe. For example, ICAP, the world’s premier inter-clearing and settlement also requires good
dealer broker, unveiled the expansion in Septemberconnectivity, which is not always undertaken at the
2008 of its premium connectivity i-Cross service tosame place, he notes.
Equinix’s London-Slough (LD4) Internet Business
Exchange (IBX) data centre.Latency arms race
Wade, referring to the current intense nature of The move aimed to provide a high-bandwidth, low
competition in the proximity hosting market, adds: latency connection to ICAP’s EBS platform for customers
“I’d describe it as the latency arms race where the heat trading spot FX in Europe. (i-Cross is of particular
has been turned up in the race,” he says. “At the end benefit to institutions without a physical presence in the
of the day, if traders were armed with perfect region but trade during that region’s hours).
|october 2009 e -FOREX 55
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