FEATURE
“To measure these latencies over and above the Differences between Equity and FX markets
traditional IP Networking Management systems, There are some differences in how latency should
specialised equipment and software is required, which be addressed in the FX market in comparison to the
we build into our service offering and enable us to equities market.There may still be a lot of one-to-
wrap a guaranteed performance SLA around delivery. one trading in FX but it is not the same as the single
These systems enable us to measure micro second central exchange that we see in equities.There is also
performance and are provided by our partners such as a difference in the complexity of the instruments and
Corvill and Correlix.” there is a much lower concentration of derivatives in
the FX market. Most importantly, however, there areWhen it comes to issues such as latency ‘hotspots’
fewer high frequency traders in FX therefore there isin different global locations, Moore believes this is
less demand for low latency services and there is muchentirely a telecoms issue. “Invariably there are certain
slower progress in fi nding FX-specific solutions.environments where there is no choice of providers
so whatever problems reside “One of the fi rst things
these cannot be resolved that the industry did in
without significant the equities market
investment. In most to address latency
cases hotspots or was to break down
pinch points are the trading process
where the telco into different
has overloaded or components –
oversold its own from the trading
network without engine to the
investing in greater marketplace, to
bandwidth.These receiving a price,
are relatively easy to executing – and
problems to solve to see what level of
for. When we latency was evident
provide customer at each step,” says
connectivity Brunton. “But the
it is dedicated FX industry is yet
bandwidth to that to take this step,
customer and we mainly because
never share or sell the majority of FX
the bandwidth firms are not driven
from under the by high frequency
client. If you want trading. Instead it
10Mb-1Gb you get is the algorithmic
10Mb-1Gb and it is traders and hedge funds
never contended.” that are leading this.”
BT Radianz is a network provider and has been The first step that any low latency vendor has to take
addressing low latency for a number of years in the when engaging with a client is to ask them exactly what
equities market but, says Jerry Brunton, director for their idea of low latency is, says Brunton. “If it is two
marketing and communications at BT Radianz, it is
seconds then they will generally be fine with whateveronly in the last 18 months that there have been any
system they already have. But if they are looking forenquiries from the FX industry about reducing their
sub millisecond levels of latency, then they will have tolatency. “This has mostly been from the specialist
look for specialist products.The main objective is tohedge funds that make their money by trading
reduce the virtual distance between the trader and theextremely quickly and they are now moving into the
execution venue or counterparty.This can be achievedFX market.They’ve been through the whole latency
by a combination of co-location and faster componentsissue in their equities trading and now they want to
so that there is a communication path that is as straightknow how to apply it to FX.”
|68 april 2010 e -FOREX
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