AWS, the Singapore Exchange (SGX) and Aquis Exchange recently completed a proof of concept (POC) that confirmed the viability of situating an exchange matching engine in a cloud environment.
The POC – which focused on evaluating the core functions and connectivity latencies of Aquis’s order-matching platform in the AWS cloud – demonstrated respectable order turnaround latency and jitter measures, compared with standard optimized data centre set-ups, indicating that cloud could present a feasible hosting option for both start-up and established exchanges and execution venues.
The POC made use of AWS’s Transit Gateway facility to handle the multicast requirement that is so often cited as a barrier to migrating high-performance trading functions to the cloud.
Using Transit Gateway, the POC was able to produce matching latencies on the Aquis platform of 100-200 microseconds, compared with 13 microseconds in a fully optimized environment. After some work to reduce variability, AWS and Aquis were able to reduce jitter on the POC to just 4 microseconds, making the approach viable for trading firms accustomed to tuning their trading strategies to venues’ jitter measures.
Adrian Ip, director of product management at Aquis, calls the jitter measure “an amazing result” that supports the possibility of operating exchange matching engines in the cloud. While cloud is slower than a fully optimized data centre implementation, high-performance market participants would be able to use AWS’s Direct Connect facility – or other cloud operators’ equivalents – to create a high-bandwidth uplink from FIX engines, smart order routers and other trading algorithms hosted within traditional data centres like those operated by Equinix, Interxion and CenturyLink.
By setting access parameters based on, say, number of network hops, operators of cloud-based exchanges could ensure a level playing field while eradicating the need and expense of operating colocation facilities. Ip reckons the set-up costs for establishing matching in the cloud could represent an 80%-90% savings versus traditional platform implementations within data centres. He also suggests that cloud’s higher levels of resilience could go some way to reduce the outages experienced by such high-profile markets as Australian Stock Exchange, Japan Exchange Group and Euronext.
To facilitate the POC, says Ip, the partners created multiple virtual private clouds (VPCs) that used the Transit Gateway facility to handle connections to trading entities’ FIX engines situated within those entities’ AWS instances. Through this connection, the POC was able to control access to the matching engine, ensuring security and resilience.