Gaining competitive advantage with ultra-low latency FX connectivity >>>
and direct as possible, with low latency switchers and
routers that eliminate as many hops as possible.”
Geographical element
Is there a geographical element to latency? Are some
less developed markets more prone to latency because
of the basic infrastructure in place? Or do the major
financial centres experience bottlenecks due to the
sheer volume of trading? “The majority of trading is
done in the major financial centres and that’s where
there is more effort to reduce latency. Having said
that, it was only in the last 12 months there has been a
fibre connection between New York and Chicago.”
This delay was down to the legacy of the US telecom
industry where AT&T had enjoyed a monopoly for
decades before deregulation was introduced in the
1980s bringing different operators for each region. And Alan Berryman
it is similar situation in Europe where the fi nancial “If you select a provider that delivers the shortest
centres of London, Paris and Frankfurt are as similarly fibre path and remove layers of legacy technology,
spaced apart as New York, Boston and Chicago and you can lower latency fairly easily”
suffer a similar lack of direct connectivity. “All of these
financial centres want to be competitive and the key to
that is connectivity,” says Brunton. is about their own product. For example, we schedule
our maintenance upgrades around the fact that the FXFor any firm that is seriously focused on low latency
market is a 24-hour business across timezones. Maybetrading, they have to be looking at co-location. “It is
not every vendor in the FX market does that.”the only way to mitigate the physical constraints of
distance and the lack of international connectivity,” AboveNet is a leading provider of high bandwidth
says Brunton. However, he concedes, “if you are fibre optic networks in Europe and the United States.
dealing with multiple venues, as in the case of FX, According to Alan Berryman, UK Sales and Marketing
you have to consider how important it is to be co- Director: “ultra low latency is becoming an important
located at each venue and how the expense weighs factor in a wider range of asset classes including FX,
up against the potential benefits. In recognition of as the market finds equities trading increasingly
this dilemma, BT Radianz offers a proximity solution fragmented and more difficult to secure consistently
to clients. We have a number of hosting centres at strong profits.
various international locations and we can co-locate
our customers using these centres rather than leaving “Traditionally, it has been acceptable for trade
them to co-locate at each one separately.” execution in the FX market to be relatively slower.
Participants are now demanding the same ultra lowTechnology partners
latency performance that they have come to expect
So what does Brunton believe FX fi rms should when trading equities. And because their portfolios
be looking for in an ultra-low latency technology are increasingly cross asset and cross-border, traders
partner? “At its most basic level, addressing latency are looking for high performance connectivity in order
is about finding the cleanest, fastest and straightest to support their need to be able to trade in multiple
line between point A and point B but there’s a lot assets across multiple venues with transactions that can
to be said for knowing the market and knowing the involve multiple currencies.”
business,” says Brunton. “We connect to over 50
portals and we have people that have been in the FX As a result, trading firms are increasingly looking to
trading business for a number of years. Whatever the extend their FX requirement to include hedging and
industry, it is important for any vendor to recognise arbitrage strategies in tandem with equity trading.
that it is about their customers’ business more than it “Addressing low latency in the FX market is, however,
|april 2010 e -FOREX 69
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