How do traders make money? They buy low and sell high. They spot temporary imbalance between supply and demand and take positions. Simple isn’t? Due to the availability of high speed computers and networks, such temporary imbalance happens in micro or even nano seconds that the traders want to capitalize on. How to spot them? Complex indeed.
The TABB group estimates that a 5 millisecond delay in transmitting an automatic trade can cost a broker 1% of the flow, which potentially amounts to USD 4 Million in revenues per millisecond for larger firms. Reuters says trading a stock is faster than a blink of an eye or speed of a lightning strike.
So, in the race to shave off as much time as possible, traders are ramping up their technologies and networks to get close to speed of light.
Two key factors involved in high frequency trading are:
- Latency: Delay that occurs in transmitting buy and sell orders
- Throughput: Amount of data processed over a period of time
So, ‘Low’ latency and ‘high’ throughput means better profits for trading firms.
But the laws of Physics do impose its limitations. Light propagation in a fiber optic network introduces a latency of 5 microseconds per kilometer. However, cutting edge technologies and network topologies can help shave off as much time as possible.
Modern business applications such as high frequency algorithmic trading, seismic exploration analysis, movement of large volume of storages or virtual images, large scale data analytics need predictable network performance that offer ultra low latency. The switching architecture for these types of modernistic networks should have equal amount of non-blocking bandwidth and predictable latency across all nodes. Even the newer multi-core processors add to the stress on network bandwidth. Thus, consistent performance with a balance of terabit scalability, predictable low latency, non blocking throughput, high speed interconnects driving multiple 1/10GbE and future 40/100GbE are important characteristics of cloud networking architectures.
SP Sysnet has partnered with Arista to offer cutting edge low latency solutions to next generation data centers and networks. SP SysNet can assess your situation, extrapolate to emerging trends, advice and implement low latency solutions tailored to your needs that gives you an edge over your competitors.
Financial applications and high frequency trading platforms use real time market data feeds, demand cut through and shared memory switching technologies to deliver ultra low latencies that are measured in microseconds and sometimes even hundreds of nanoseconds. The advantage of this 10GbE architecture is best latency with minimal buffering at port level. This guarantees near instantaneous information traversal across the network of data feed handlers, clients and algorithmic trading applications.
Are you planning to build and operate any large scale complex systems such as below?
- High frequency financial trading applications
- High performance computing
- Clustered compute applications
- Video on Demand
- Network storage access
- Web analytics, Map-Reduce, Database, search queries
- Virtualization
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