e-Forex-Nov-23

Achieving and maintaining an ultra-low latency FX trading infrastructure
“Even a minor tweak can ripple through the latency
landscape. This is where specialised monitoring systems earn
their keep”
replacements can be expensive, while
software optimisations are often more
cost-effective.
well as the closeness of its vendor
relationships.
Distance from the participant is yet
another crucial factor. McArthur
notes that just 200 metres of cabling
can introduce approximately one
microsecond of latency in each
direction.
TRADERS WORKSHOP
Ariel Silahian
• Code that has not been optimised
for speed
• Subscribing to too much market
data
To determine whether these issues
can be resolved via software or
hardware solutions, the first step is to
identify the type of latency (network,
disk, application) suggests Eugene
Markman, ION FX Chief Operating
Officer.
“Each requires a different approach,”
he continues. “Network latency
issues, for instance, may be addressed
with software optimisations or by
upgrading network hardware. A
root cause analysis is important to
determine whether the source is
a software bug, inefficient code,
network congestion, or hardware
limitations.”
From this, bottlenecks will need
to be identified and resolved. If
the bottleneck is due to hardware
limitations such as a slow disk drive
or insufficient RAM, a hardware
upgrade may be necessary, whereas
optimisation can resolve inefficient
resource usage. Hardware upgrades or
DON’T REST ON YOUR LAURELS
Enabling ultra-low latency trading
is an ongoing process. In addition
to inadequate or ageing hardware
components, slow network
connections, poorly designed software
architecture, and inefficient code,
there are a host of other factors that
can degrade operational performance.
“Relying on third party data providers
or trading platforms can introduce
latency, especially if these services
experience delays or downtime,” says
Markman. “Inefficient data processing
or a lack of parallel processing can also
lead to latency, as can inefficient order
routing algorithms or connections to
exchanges.”
Performing thorough risk checks and
compliance validation can add latency
to trading systems, which underlines
the challenge of balancing low
latency execution and effective risk
management.
“Rapidly changing market conditions
can stress trading systems and
lead to latency degradation, as can
overloading the trading system with
too many orders or data feeds,” adds
Markman. “It is also essential to
carefully validate software updates or
patches before deploying them in a
trading environment.”
Inevitably, cost is a major
consideration. Software fixes tend
to be cheaper, but new hardware
may provide a long term solution.
The final decision is often influenced
by whether the firm has in-house
software or hardware expertise, as
“The choice between store and forward
switching and low latency cut-through
switches is also significant,” he explains.
“Enterprise switches (designed for
capacity and throughput) often involve
large buffers and store and forward
operation, taking tens of microseconds
to pass on packets. Conversely, purpose
built low latency cut-through switches
can deliver packets in hundreds of
nanoseconds.”
Where there is redundancy built into
the architecture (for example, high
availability switches, bonded NICs, or
primary and secondary network links)
it can be easy to forget to test the
failover or monitor the performance of
secondary routes.
“A good system will have ongoing
failover/resiliency testing and monitor
the impact on performance,” adds
McArthur.
KEEP YOUR EYES ON THE PRIZE
To establish an ultra-low latency
framework it is crucial to have
clear targets, controls, and an
understanding of the trading
platform’s scope.
Any deviation from these parameters can
result in performance declines, suggests
Culiniac. “A comprehensive monitoring
and analysis system is therefore essential,
one that integrates both technical and
business indicators to detect and address
any early signs of potential degradation,”
he adds.
Markman refers to a number of analytical
toolsets that can help firms monitor the
state of their trading infrastructures:
72 NOVEMBER 2023 e-FOREX