Latency Wars – The Empire Strikes Back – 5 February 2010
First Published Sunday, 7th February 2010 10:07 am from Fidessa : Fidessa
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target="_blank">announcement this week that the
LSE's new low latency platform, Millennium Exchange,
will be up and running in September. This comes just months after
its acquisition of the Sri Lankan firm, Millennium IT, which
supplies the technology and is testimony to the new thinking now
taking place at the LSE. The same news item also mentions that
the LSE has adopted a "self certification
procedure" for the transition which will place the onus
on the trading community to ready itself for the new platform.
This is a canny move by the LSE as it enables them to regain the
initiative and, at the same time, set the agenda for its members
and technology partners. This is because both will need to focus
on ensuring an orderly transition to the new platform between now
and the go-live date.
target="_blank">FT Trading Room earlier this week
highlights what all the fuss is about: latency and the growing
number of High Frequency Traders who supply more and more of the
liquidity in today's markets. Whilst we can all debate
whether the HFT phenomenon is a good or a bad thing, they are
most definitely here to stay and have been a fundamental force in
fragmenting liquidity both in the US and in Europe. Now that
Tokyo has joined the low latency debate with the TSE's
new arrowhead platform it will be interesting to see if this
ignites the fragmentation fuse in Asia too.
This headlong rush to low latency must of course be
accompanied by due consideration for resilience and failover.
Most technologists agree that there is a basic trade-off between
speed and resilience - the faster you go the harder it is to put
the car back on the track if something goes wrong. In the US,
this is much less of an issue as the rest of the market provides
resilience in the event of a glitch at any one venue. As we have
seen in Europe, however, the lack of a consolidated tape and
other factors mean that trading seems to simply stop in the event
of an outage at a primary exchange.
point, it was interesting to see the results of our own poll on
how best to solve the current issues surrounding the lack of a
European consolidated tape. 60% favoured a collaborative approach
as opposed to more regulation. With the stakes so high, and so
many vested interests, it will be a great achievement if we can
solve these issues ourselves without more
"help" from the regulators.