Progress - past, present and future

Best Execution Guide to Low Latency 2010 35
LOWER LATENCY TRADING
engineering environment which is the Formula
1 pit stop of high frequency trading (HFT)
technology support. The development of these
disciplines has been promoted significantly by the
insight and skills of the niche advisory firm STAC
(Securities Technology Research Council) who
have both contributed to the science of analysing
the respective contributions of each layer and
worked to create consensus in how to measure
and report on performance. This is starting to
take Formula 1 knowledge into the top end of the
domestic boy-racer market, still an enthusiast’s
market where detail will pay dividends but
nonetheless better and more broadly understood.
One of the most recent phenomena is the effect
regulation has had on the market and the arrival
of new execution venues. Enter the rapid arrival
of new pools (dark or otherwise) of liquidity,
coming to market on lower cost industry standard
hardware and hosted in proximity data centres
from providers such as BT – the combination
lowers barriers to entry and enables fast time
to market. As latency then seeks out every
opportunity for reduction – a new market of
CoLo – collocation of trading routing systems
alongside venue matching engines has emerged.
The business model of exchanges has been
turned upside down (or at least augmented) and
new players enter the mix of what makes up a
solution. Recent collaboration between Intel and
HP has opened the opportunity to test some of
the above engineering concepts in the real world
of execution environments.
In all the scenarios and individual elements
painted above – do not under estimate the value
of collaboration and interaction. Joining a number
of these worlds is “service” – service as a hosting
environment of datacentres and CoLo (where
the global reach of BT acted as an early market
maker in the trading life cycle), and services
to advise on the technical design details of the
various moving parts. Cooperation between HP
and BT is long established and niche expertise in
the firms can be brought to bear in the context
of trading. Both firms have invested in the Intel
fasterLAB environment – a proven cross-vendor
test bed for all the vital infrastructure components
which affect latency in the trading context.
The Formula 1 car will not optimise its time
trials if there is not near perfect synergy between
its moving parts from a dedicated engineering
team. To win, a Formula 1 car must tightly
integrate and tune all parts within a balanced
aerodynamically optimised platform; this requires
and accommodates a “bleeding edge” engineering
focus. The world of HFT and low latency is the
same – and it is no accident that this paper comes
together from three major technology players
collaborating around their core competencies,
stretching the envelope in terms of how solutions
are developed for today’s trading world. Hewlett-
Packard realises that supporting HFT and LLT
is not just a statement; it’s a commitment, a
vision and a holistic approach. This includes
driving standard efforts to foster an ecosystem
of high performing parts, engineering platforms
that facilitate integration of these parts without
introducing latency and jitter, conducting
on-going end-to-end testing of the integrated
platforms under typical trading conditions,
and driving a research agenda that enables
higher performing trading systems. Also, just as
Formula 1 races have gas caps, trading platforms
must achieve peak trading performance while
optimising consumption of power, space, cooling,
and investment. Hewlett-Packard takes a holistic
view and recognises that systems must deliver this
capability within a constrained environment.
The technology market is far from perfect
and often represents a challenge to optimise
its delivery. However, in trading, the winner’s
spoils from leading edge of performance are
significant. As an enabling and disruptive force,
never has technology engineering been such an
obvious and visible a contribution to business
performance.