The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Cost of Trading Infrastructure Goes Down as Demand for Lower Latency Goes Up

Share article

The cost of technology to optimise trading infrastructure is going down, but that doesn’t mean demand for increasingly low-latency solutions is going down too. A panel at A-Team Group’s recent TradingTech Summit in New York City discussed the issues of optimisation for high performance under the auspices of moderator Greg Piesco, associate partner at Citihub Consulting.

Opening on the cost of technology, and how consumers are responding, the panel went on to discuss the issue that whenever lower latency is mentioned, there is always an impetus to build a new network, but how much will it cost?

As trading organisations continue to call for lower latency solutions and the name White Rabbit – a time-deterministic, low-latency Ethernet-based network which enables transparent, sub-nanosecond accuracy timing distribution – pops up repeatedly, low latency technology providers are under pressure to create more competitive technologies at lower costs.

Jason England, head of capital markets networks and hosting at TD Securities, said: “Technology for performance is getting much cheaper, we don’t buy anything less than a ten-gig circuit for anything now. Within the metro area it’s about one thousand dollars a month.”

Raymond Russell, co-founder and chief technology officer at Corvil, added: “Technology is constantly getting cheaper, but there’s still a competitive pressure to make sure you’re keeping up with your competitors, so there’s a certain steady state on the price you have to pay, but there’s no let up on the pressure on that. We see our customers operating in a way that’s ever more cost conscious, and one of the moves that we see is that people are consolidating and sharing infrastructure both internally and externally – it’s cheaper, but it’s still not cheap technology. We’re trying to sweat the most out of technology to meet the needs of business, but also to provide an economic price point.”

Cost-conscious firms are scrutinising where they spend as the cost of being a major player in the trading game has increased significantly overall in terms of infrastructure. In order to manage costs, Eric Powers, head of infrastructure at HC Technologies, proposed a model for charging underlying teams. He said: “In a smaller organisation, we’re very conscious about individual trading strategies being aligned directly with all the infrastructure they’re using. We look at the costs in alignment with trading teams to see, for example, if team one is more successful and profitable than team two.”

The discussion moved on to the granularity of timestamping based on three key areas: time, implementation and how protocols function. Steve Williams, general manager at Fixnetix, warned that if clock drift occurs, analysis can be off the mark, and if core systems are implemented incorrectly, data could be inaccurate. He said that if timestamping is not implemented properly in an overarching style that allows firms to connect to all the elements in their world and sync them, there will be clock drift. England added: “With MiFID II and the CAT, I would say that our cost to measure and be compliant, and process alerts and understand how things are drifting, is more expensive than the underlying system.”

Leave a comment

Your email address will not be published. Required fields are marked *

*

Related content

WEBINAR

Recorded Webinar: Moving the trading technology stack to the cloud

Migration of financial apps and data to the cloud is well underway as financial institutions take the opportunity to cut the cost of running systems on premise, scale as and when required, and spin up test environments quickly and inexpensively. Moving the trading technology stack to the cloud is a different and more difficult proposition....

BLOG

LSEG Technology Makes First Deployment of Millennium Exchange in the Cloud

London Stock Exchange Group’s technology solutions provider, LSEG Technology, has achieved a couple of ‘firsts’, with its Millennium Exchange matching engine being deployed in the cloud and for a digital asset exchange for the first time. The deployment, at 24/7 digital asset exchange AAX, also extends Millennium Exchange’s asset class coverage to crypto currency pairs...

GUIDE

Valuations – Toward On-Demand Evaluated Pricing

Risk and regulatory imperatives are demanding access to the latest portfolio information, placing new pressures on the pricing and valuation function. And the front office increasingly wants up-to-date valuations of hard-to-price securities. These developments are driving a push toward on-demand evaluated pricing capabilities, with pricing teams seeking to provide access to valuations at higher frequency...