e-Forex-Nov-23

TRADERS WORKSHOP
Achieving and maintaining an ultra-low latency FX trading infrastructure
“Achieving ultra-low latency requires a holistic approach that
meticulously optimises each step from data transmission to
execution”
Alexander Culiniac
Ultra-low latency trading can be
defined as a system capable of
processing data in nanoseconds,
compared to standard low latency
which is measured in milliseconds
or microseconds. Bridging this gap
is expensive, though, and requires
specialised hardware and software.
“It is not just about going faster; it’s
about designing a sleek, custom built
engine capable of conquering those
tiny fractions of time that make all the
difference in high stakes trading,” explains
Ariel Silahian, Director of Electronic
Trading at SiS Software Factory.
You can pay to be as close to the
exchange as possible, but with
equitable access you can only get
as close as other participants states
Gordon McArthur, CEO of Beeks
Group. “If you have fixed latency
budgets then your competitors
generally do as well, so ultra-low
latency is about ensuring all other
elements of your trading system are as
fast as possible,” he says.
The number of participants in
the market at different stages of
implementing ultra-low latency
limits the benefits since interactions
between two parties will only be
as fast as the slowest participant
observes Alexander Culiniac, CTO/
Managing Director of the commercial
banking & payment product business
group at SmartTrade Technologies.
ATTENTION TO DETAIL IS VITAL
“An FX trading platform must contend
with various latency types, such as
network, propagation, processing, and
software-related delays,” says Culiniac.
“Achieving ultra-low latency requires
a holistic approach that meticulously
optimises each step from data
transmission to execution.”
The primary users of these systems
include high-frequency trading
firms, hedge funds, and market
makers, although as the value of
improved performance rises relative to
infrastructure costs, firms across the
sell-side and buy-side are looking to
achieve ultra-low latency.
Silahian notes that the decentralised,
fragmented nature of the FX market
presents some specific challenges.
“Unlike equities, FX is more about
exploiting delayed prices across
different platforms,” he says.
“Execution speed is generally a little
slower - even the fastest margin FX
broker isn't as quick on the draw as
Nasdaq. In addition, looser regulation
in FX leads to protective measures
by market players against high speed
trading strategies, such as speed
bumps or last look.”
“The primary protocol for FX market
data and trading is slow, lacks traceable
timing, and is peer-to-peer rather than
multicast observes McArthur. “Some
FX markets have started to offer lower
latency multicast market and binary
trading protocols, but these are still
in the minority,” he says. “With no
single source, it takes a lot more time
and effort to apply the methodical
approach to ensuring latency-tuned
access between participants.”
Specific factors that impact latency
include:
• Slow infrastructure (servers/network
cards/switches)
• Additional infrastructure adding
hops (firewalls, layers of switches)
The decentralised, fragmented nature of the FX market presents some specific challenges
• Physical distance from trading
counterparties
70 NOVEMBER 2023 e-FOREX