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New Latency Measurement Tools From Reuters, TS-Associates
A pair of products designed to measure and monitor latency--a growing area of technology development amid ever-growing market data volumes--made their debut this week.
Reuters, in conjunction with vendor partners Endace and Trading Metrics, on Monday introduced a system that measures the network delay between the source of market data and its delivery into a firm’s trading applications. And Trading Systems Associates announced today that it has launched TipOff Latency Feed, giving users access to real-time latency information from trading venues that can be used to enhance algorithmic trading models.
Noting that latency is a topic of great interest for both traders and technologists, Nick Dutton, director of business development at TS-Associates, a London- and Singapore-based provider of solutions that analyze network latency and performance, said that, “although technologists focus on problem identification and resolution, traders want tools to help them make money.” TipOff Latency Feed, he added, “addresses both these needs.”
Though TS-Associates calls the product, based on its TipOff middleware analysis appliance, “unique,” it acknowledges that some sell-side firms and larger hedge funds likely have similar services in-house. “We look upon this new offering as the latest weapon to be used in the ongoing latency arms race,” said Henry Young, TS-Associates’ director of product development.
The Latency Feed service examines the time lag between an exchange’s private, internal acknowledgment of an order fill and the point at which it has a public impact on the order book--what TS-Associates calls the “under the radar” trade time. “This is information that essentially tells financial institutions how long their trade remains private and how long before other institutions can see information about that trade,” said Young. The pricing latency data is aggregated into a feed that can be integrated into a firm’s algorithms.
Young said that the service was developed in response to a “prop trading desk that simply wanted to set a latency threshold over which they considered themselves out of the market on a real-time basis. That quickly finessed from step behavior to adaptive behavior. But when trading assets across multiple venues, differential exchange pricing latency data enables automated trading algorithms to be better informed about where to direct order flow.”
John Jacobs, director of operations at Lime Brokerage in New York, said that the product sounded like a “nice off-the-shelf solution” but something a trading firm could easily build on its own.
Lee Maclin, director of research at Pragma Financial Systems, a New York-based developer of algorithmic trading systems, said that in terms of keeping the exchanges efficient, “this is a great service.” Such an offering could cause venues to upgrade their infrastructure, he noted, which would be a welcome development.
However, Maclin questioned the value of monitoring such minute latencies. “Most algorithmic trading is strategically designed to slow down and stretch out the trading process so they are not really going to be affected by the monitoring of very small latencies,” he said, adding that such information might be beneficial to certain trading strategies.
The new Reuters service provides Reuters Market Data System users with end-to-end latency monitoring and visual display capabilities. The service--Reuters Latency Monitor (RLM)--uses New Zealand-based Endace’s Ninjabox-LM hardware and Trading Metrics’ latency performance analysis software, Market Latency Metrics. The three companies will co-market the product to current and prospective clients.
According to Terry Roche, EVP of strategic business at Reuters, firms will benefit from being able to quickly identify market-data bottlenecks and take action, shifting strategies accordingly. “Much of today’s trading capitalizes on fleeting opportunities created in high-velocity markets,” said Roche in a statement. “Traders who are first to identify and act on those opportunities usually execute the most profitable trades.”
“Algorithmic trading is forcing an advance in network and service performance,” added Jeff Drew, CEO of New York-based Trading Metrics. “Ninjabox-LM delivers a key component in this quest for low-latency solutions. You cannot improve what you cannot measure and with RLM, Reuters customer now have the capability to accurately chart performance at all points in a network infrastructure.”
Market Latency Metrics, which Trading Metrics released last month, is designed to continuously measure market data latency, the throughput of trading systems and whether there are delays related to exchange-derived data (Securities Industry News, Breaking News, Feb. 5).
San Jose, Calif.-based Cisco Systems and Corvil of Dublin also offer latency monitoring solutions.
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