The London Stock Exchange (LSE) has launched Exchange Hosting, a new co-location service, which will offer sub-millisecond access to its TradElect matching engine and Infolect market data feed. The LSE claims the latency reduction the service allows will effectively eliminate network latency from overall round-trip trading times. Network latency accounts for about 1.5 milliseconds – roughly one-third of the total latency incurred by firms trading on the LSE.
“We have seen extremely high demand from our clients for performance-related products and any initiatives we can introduce to improve their speed and access to our market,” Wendy Morgan, head of real-time data at the LSE, told theTRADEnews.com. “Exchange Hosting fits in with that strategy.”
For TradElect, the Exchange Hosting service will cut access times to 130 microseconds. “In general, if you are on a 100 megabit line within the London area then the average latency is currently around 6-700 microseconds,” said Morgan.
The reduction in network latency, however, does not affect the latency of the TradElect system itself. This is currently six milliseconds, but will reduce to three milliseconds following an upgrade later this month. Upgrades in September and October will also boost TradElect’s message capacity to 20,000 continuous messages a second.
The launch of Exchange Hosting is the latest in a line of initiatives designed to attract high-frequency trading firms to the LSE, including the upgrades to TradElect and a new pricing scheme, effective from today, which includes a rebate for firms posting liquidity and the abolition of the 7.5 pence execution charge.
Morgan claimed the work done so far is bearing fruit. “The continuous upgrades to our core systems has kept existing customers coming to us,” she said. “We have already seen new customers and we continue to see a pipeline of customers coming to trade with us as a result of this.”
She added, “The whole upgrade process is about working with our existing clients, responding to what they are asking us for in terms of faster services, but also attracting new investment into London and the London Stock Exchange.”
Exchange Hosting will be launched in two phases. Phase one, an initial installation of server cabinets, will start this month. These will satisfy existing client demand LSE for its co-location service. A further installation of cabinets will take place in February 2009, in addition to a number of supporting services. These could include more comprehensive management of clients’ servers and hardware, and also the provision of external data from other execution venues. “All of these services are based on customer demand, so we are currently consulting with clients to identify the key things that are of value to them,” Morgan said.