About a-team Marketing Services
The knowledge platform for the financial technology industry
The knowledge platform for the financial technology industry

A-Team Insight Blogs

When Is Lower Latency Worth The Effort?

Subscribe to our newsletter

Shaving response times by nanoseconds can produce value in high-frequency trading, but the cost of achieving that size of an improvement in latency, in resources and time, can be too high for trading of more complicated types of securities, according to low-latency services and market access platform providers.

“High frequency traders are responding at a level of 200 nanoseconds,” says David Snowdon, chief technology officer and co-founder of Metamako, a Sydney-based low latency technology company. “If you want to get it down to 190, 193 or 195 nanoseconds — get those last few nanoseconds out of the system, you have to measure very accurately what time events happen on your network, so you can then understand what your response time was.”

Firms also should look at variance in their response times around the 200 nanosecond level, according to Snowdon. “Being able to measure that variance is extremely important to exchanges, to guarantee that they’re providing fair access to the market,” he says.

While frontiers of speed can still be trimmed, as Snowdon states, having a certain level of speed and a certain low level of latency has become a given in the industry — and one that need not be improved upon, as Dan Hubscher, director of strategy at Object Trading, a direct market access platform, describes.

“Speed is still important in that for anyone who has a strategy that depended on speed, they can’t get slower and still be profitable,” he says. “They still have to maintain that minimum level. The problem for most traders is that they’ve reached a commercial limit, where it doesn’t pay. It doesn’t return dividends to get it any faster.”

Furthermore, trying to lower latency when dealing with asset classes other than equities requires clearing additional hurdles, according to Hubscher. “Latency arbitrage on multiple exchanges doesn’t really exist in futures,” he says. “Trading a wider array of products across many more geographies — different types of derivatives and asset classes — pushed the game into one of scale, bringing in cost control.

“When you’re scaling up to different destinations, especially if you still need some degree of low latency, managing pre-trade risk, positions and exposures … is harder if you’re constantly adding new things that aren’t familiar.”

Subscribe to our newsletter

Related content

WEBINAR

Recorded Webinar: Managing Non-Financial Misconduct Under SMCR

Non-financial misconduct – encompassing behaviours such as bullying, sexual harassment, and discrimination is a key focus of the Senior Managers and Certification Regime (SMCR). The Financial Conduct Authority (FCA) has underscored that such misconduct is not only unethical but also poses significant risks to a firm’s culture and operational integrity. Recognizing the profound impact on...

BLOG

Quantum Readiness in Trading: Why Cryptography and Data Governance Matter More Than Qubits

Quantum computing is becoming one of the most widely discussed emerging technologies in financial markets infrastructure. In industry commentary, the technology is often framed either as a revolutionary engine for trading performance or as an existential threat to the cryptographic systems that secure global finance. In practice however, the near-term impact is likely to be...

EVENT

TradingTech Summit New York

Our TradingTech Summit in New York is aimed at senior-level decision makers in trading technology, electronic execution, trading architecture and offers a day packed with insight from practitioners and from innovative suppliers happy to share their experiences in dealing with the enterprise challenges facing our marketplace.

GUIDE

Regulatory Data Handbook 2022/2023 – Tenth Edition

Welcome to the tenth edition of A-Team Group’s Regulatory Data Handbook, a publication that has tracked new regulations, amendments, implementation and data management requirements as regulatory change has impacted global capital markets participants over the past 10 years. This edition of the handbook includes new regulations and highlights some of the major regulatory interventions challenging...