It is possible to trade using techniques that despatch data travelling at speeds four milliseconds faster than the speed of light, says Lincoln Dale, Asia Pacific chief of engineering at Arista Networks, who spoke at Trading Architecture Asia in Hong Kong this week.
Whilst light travels at 186,000 miles per second in a vacuum, he explained that in our atmosphere, and travelling down fibre optic cables that traders use, light travels somewhat slower.
Microwaves transmitted between towers standing in Chicago and New York arrive four milliseconds quicker than by fibre optic cable, says Dale, who believes the time saving could be a big advantage for traders.
“Brokers are under pressure from customers for faster order management systems, lower latency as well as high resolution accounting data, while regulators are pressuring brokers for firewalls that can impede fast performance,” says Dale.
Arista Networks has the second biggest market share for 10 gigabit Ethernet switches for network architecture and has production deployments in nearly all of the world’s top ten cloud operators.
Dale used to work at the biggest firm in the sector, Cisco Systems. At Arista, he is responsible for the firm’s next generation of products.
“Latency-sensitive customers are forced to make a choice between system density, scalability, performance and features,” he says. “Granular network visibility is still extremely expensive, complex and decoupled from network devices.”
A trader attending the forum explained off stage that if a participant buys new infrastructure which gave them, say, a five micro-second advantage, then they can get to the head of the queue when they have a position that they want to shift.
“You’re high and dry then with a market going against you. Your business model can disappear overnight when that happens,” he said. “That has happened to two traders I know who became uncompetitive and were put out of business when a new participant with new infrastructure and a different build flicked on their switch and started trading. It blew out their business.”
Achieving highest performance trading networks requires elements such as the latest servers and low-latency switching, but these networks are hard to instrument and it is difficult to maintain an advantage.
In Dale’s experience, clients nevertheless still want that end-to end instrumentation plus the knowledge of precisely how long it will take before an order hits the order book; the shorter the better.