GreySpark Partners, a capital markets consultancy, has revealed low latency offerings in Asia have become mature enough for firms across the region to remain competitive but investors need to upgrade their infrastructure and technology to reap the rewards.
The report, ‘Low latency in Asia-Pacific: an infrastructure view’, advises Asia-Pacific market (APAC) participants to be proactive in adjusting and updating their technology roadmaps to compete on a global scale. The report also provides insight into market fragmentation across APAC, noting a strong understanding of the markets, unrestrained infrastructure and co-located equipment is crucial to benefitting from low latency environments.
“Rising competition, particularly in electronic trading, which has become the de-facto trading method at multiple venues, has meant that pursuing a successful latency strategy is key. For APAC, where distances are greater, the network latency can play a key role in the overall latency. A well-thought out equipment collocation strategy, therefore, can be a game-changer,” said Andrew McLauchlan, managing director of GreySpark’s Asia-Pacific operation.
The report noted that reduced latency had become a vehicle for exchanges to gain a competitive edge. All major APAC exchanges have recently upgraded their trading platforms. These platforms are also becoming more standardised, with many of the upgraded platforms using low latency, white-labelled technology from global exchange software providers.
But despite APAC exchange initiatives to seek low latency solutions, regulatory constraints in individual markets have so far had a negative impact upon high frequency trading (HFT). According to GreySpark, in Asia, HFT stands at just 10% of total volumes, which is low compared with 40% in Europe and 60% in the US.
By Sophie Pallier