Happy Insurrection Day! Yep, I am a Brit ... and so I am working today while most of the low-latency community is having a slow day instead. It seemed a good time to kick off a new monthly series where I get to give some opinions and insight into the world of low latency, and the technologies underpinning it, drawing on questions I get asked as I go about my day to day work researching this fascinating topic for IntelligentTradingTechnology.com. So, here goes ...
Q: Is the low-latency arms race over?
A: Nope, but it is evolving. Expenditure in low-latency technology is being made in a more measured way, with a focus on return-on-investment. Not every trading firm is seeking to be the fastest, and that means they can tailor their spend to meet their business. One quote from last week's HFT World conference in Chicago: "A firm can be 30th fastest and still make decent money."
Q: So what are some areas where there is still significant focus/investment?
A: Connectivity, in general. Which includes co-lo and proximity. Looking at new routes and placement of trading systems is still a straightforward way to look at reducing latency. Also, when firms are seeking alpha in new markets, it's usually a requirement. Oh, and NYSE Mahwah opening up will see some near term activity.
Q: Is microwave connectivity a new option?
A: For some, depending on the application. On the routes where it is deployed, it is faster than fibre. But it has limited capacity, and is still prone to reliability due to the weather. So developments like CFN Services/xCelor are interesting, and I hear that there are alternative RF approaches coming down the line with much more bandwidth. In the meantime, check out Windy Apple.
Q: What about continued action in the FPGA space?
A: Yes, especially for firms looking to shave microseconds off their 'tick to trade' processes. Arbitrage, market making will benefit. Also, some firms are getting attracted to FPGA-based systems because they are physically compact and draw less power. But providing the basic technology has rapidly become quite a crowded market. I'm expecting some consolidation.
Q: Any thoughts on the recent SIFMA show?
A: Not too many that are good. I've been going to it since it was at the Sheraton and I've always been a fan. But it's been in decline the last few years and this year that decline accelerated. That said, there are still quite a few vendors in the low latency space that attend. Best in show for me was Zeptonics.
Ask Pete a question by emailing firstname.lastname@example.org.