01/10/2011
Second item in Securities Technology Monitor list of top items for technology in 2011
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2. Keeping track of time. Most broker-dealers will still need to focus on reducing delays in receiving market data and acting upon it, to keep up with the competition – the high-frequency traders. The fewer the delays – the lower the latency – the faster you can respond to information that affects prices. That’s why buying into co-location services –installing servers close or very close to stock exchanges and other trading venues – becomes more critical. So too will complex event processing engines which dissect and analyze market data quickly. And time-stamping software.
“One of the newest frontiers in low latency is the quality of the time itself that gets distributed to applications like algorithmic engines and smart order routers,” says Victor Yodaiken, chief executive of FSMLabs, Austin, TX-based vendor of real-time technology including FSMLabs’ Timekeeper for distribution of reference data. “The range of acceptable accuracy keeps shifting.”
Last year, says Yodaiken, the goal of many financial firms was to refine the accuracy of system time to within a few microseconds of geographic positioning system time for co-located equipment, and below a millisecond out on the edge of a network.
But with the assistance of time-stamping network chips, those numbers have been reduced to nanoseconds at the core and microseconds at the edge. “For firms that are racing for liquidity, exploiting time advantage to refine trading or risk algorithms, or arbitraging time in other ways, this high-precision time data is creating a new baseline requirement for success,” says Yodaiken.