The Need for Speed

Issue 07 October 2007
Automated Trader Magazine

How have we arrived in a world where every millisecond counts? The following comment may provide some insight: "The trading world is not a generous one. The first person to the market and execute doesn’t leave behind opportunities. Because speed determines the winners and losers……" (The TABB group LLC, Trading at the Speed of Light).

Tony Walker

Tony Walker, Head of DMA, Merrill Lynch

In the quest for reduced latency (speed to market), every part of the order value chain needs to be examined for its contribution to the time taken to complete the whole round trip time from order entry to exchange order acknowledgement. This includes client’s network connection, broker’s internal latency, network connection, exchange configuration of hardware and software, order book processing time, even the use of proximity hosting services.

Over the last three years, the benchmark for order round trip times (order entry to delivery of exchanges order acknowledgement) for the client has been reduced from 850ms to sub-60ms, for one particular European exchange. Broker’s contributions to round trip timings have come down from 500+ms to single digit, despite large increases in volume, reflecting broad improvements in performance and consistency.

In isolation, these broker improvements could have been be outweighed by the variance of exchange through put capacity. However over the same period, exchange processing times have also improved; one major European exchange’s response times have come down from 450ms to 30ms. ...