Latency, or reducing it, is the number one spending priority for IT professionals in finance, according to a survey by COLT Telecom, with 90% expecting to invest in ways of reducing it this year.
Respondents also unanimously rated latency as ‘critical’ or ‘very important’ to electronic securities trading, with the physical proximity of the trading system to the stock exchange rated as the best way to reduce it.
“Market-makers, firms pursuing arbitrage strategies and investment banks offering direct market access services to their customers, continue to seek latency improvements wherever possible,” says Ian Jack from COLT’s financial services department.
“It is hard to say at what level latency becomes unacceptable as it is all relative – as long as one firm has an edge, its performance will automatically become the industry benchmark,” he says, predicting that more companies will locate their trading systems close to stock exchange systems over the next 12 months.
“Modern fibre-optic networks are becoming increasingly sophisticated, but at the end of the day physical distance causes an unavoidable level of delay – every 200km of fibre represents 1 millisecond of latency,” he said.