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Viewpoints On Latency

Viewpoints on Latency is a regular collection of news, thought leadership and opinion from the Low-Latency.com community.

Low latency is not an island. Other technologies and approaches, such as cloud and big data, all have connections into the latency world, and all will play a part in making tomorrow's electronic trading markets profitable for players of all types.

Viewpoints on Latency is a regular collection of news, thought leadership and opinion from the Low-Latency.com community.

Low latency is no longer about being the lowest, but about being as low as it takes. Relative latency leadership is now the goal of many, and technologies including managed services and cloud will be leveraged to achieve it in a cost-effective way.

Trading firms continue to invest significant sums in low-latency technologies, with connectivity and co-location being a big focus, and a large proportion of IT budgets. Reducing propagation latency from the trading chain - by going with the fastest network provider and installing systems in co-location data centres - remains for many the simplest approach to remaining in the lead of the latency race, though in itself it’s not a universal panacea for business success.

Speaking at A-Team’s recent conference focused on “The Business & Technology of Low-Latency Trading,” John Jacobs, COO of Lime Brokerage, made the point that trading in the increasingly fragmented equities markets is not always about being the fastest. Brokerages are required to understand “what the customers are trying to do,” with respect to their trading strategies when determining co-lo and connectivity requirements. Simply leveraging those approaches and technologies gets a firm “part of the way there but it doesn’t take you the whole way there,” he said.

The “Three Ms of Latency” are a set of essential steps that turn the data that's derived from a roster of tools – including those from contributors Corvil and TS-Associates – into meaningful, actionable information that can be leveraged to boost one's business.

The Three Ms of Latency are: Measure, Monitor and Manage.

It all begins with measurement. That could mean measurement of latency within an execution management system, or the latency that exists for market data received from an exchange, or even the roundtrip latency for a completed trade with an alternative trading system or dark pool.