Latency and the Global Exchange
Earlier this week Cisco put out its study on global exchanges showing that there are at least 50 different cababilities an exchange needs to achieve peak performance. The study focuses on the top ten, which can be seen in the cross-hairs of this graphic. Coming in at number 5 was latency:
Ivy Schmerkmen at Wall Street & Technology has a terrific in-depth look at the study, including this nugget:
Before going through a major upgrade, the London Stock Exchange could handle up to 450 transactions at the peak second. After a four-year IT overhaul project, the LSE's new trading system TradeElect is now able to handle up to 2,500 transactions at the peak second and it cuts the time it took to process an order to 10 milliseconds from 140 milliseconds. Low-latency trading platforms are critical to exchanges that want to go after the algorithmic trading business, according to the study.
This hit home with me since this week I had also been reading a report put out by TABB Group in April, "The Value of a Millisecond" where they estimated, “Up to 10 milliseconds of latency could result in a 10% drop in revenues.” I knew from previous work in the financial services industry that time was money...but wow. It is obvious that exchanges need to have the most up to date network equipment, but in the rush to get these devices deployed, measuring their performance and security is, d'uh, critical (you knew I'd bring it back around to test, right?).
The reason I'm knee deep in all of this research was because this week we announced our support for the FIX/FIXT protocol. FIX (Financial Information eXchange) is the global messaging standard for the electronic communication of "trade-related data" between financial firms such as banks, broker-dealers, exchanges, and industry utilities. If these exchanges need the latest and greatest network equipment, they need that equipment to have been tested using the FIX protocol (and many others, obviously). Just trying to do our part to grab those milliseconds back!
