Global regulators are now planning a more coordinated approach to monitoring high frequency trading (HFT). MiFID II is likely to go further and extend its transparency remit into derivatives and other instruments. In order to ensure trading is conducted in regulated venues with consistent pre-trade and post-trade transparency, it’s important that business managers know the underlying health, performance and capacity of the technology stack that supports their order flow.
This article posted on the Financial Express news site outlines some of the challenges in high frequency trading - ‘Is financial trading becoming a bit like 2001: A Space Odyssey?’
Whilst understanding Microsecond latency measurement is a key part of the HFT picture, it’s important that we understand the performance across the complete trade plant & trade lifecycle. There may be other elements in the process that are unexpectedly consuming resources and these are not being measured from an end-to-end latency perspective. Geneos gives our customers visibility on latency and the ability to identify data problems earlier on, so they can be resolved faster.
At the recent European Financial Information Summit (EFITS), the panelists believe that the ever increasing speed demands of algorithmic and high frequency trading are prompting a shift to more proprietary technology development that will lead to a division between the ‘haves’ and ‘have-nots’. This was evident from the US ‘flash crash’ that occurred back in May 2010.
You can read more here about some of the issues raised at the summit here >
The people who made money from the ‘flash crash’ were those that had the right real-time operational insight in place. For instance, they knew their trading platforms infrastructure was working properly and what they were seeing was real and not some internal IT issue. These fortunate individuals could be sure that their own IT was working and that the ‘flash crash’ appeared to only be happening in the US markets. It allowed them to quickly identify arbitrage opportunities on related markets, which were not impacted by the ‘flash crash’.
High frequency trading requires a good knowledge of price feeds. Our experience in this area, using Geneos, indicates these feeds coalesce at different times of the day. People who understand this are gaining valuable intelligence helping them to better engage with their clients and allowing them to prioritise their HFT strategies accordingly. However in addition to price data, there is an increasing realisation in HFT circles that data relating to the health and performance of their trade plant, and routes to market, can be a valuable ‘feed’ into the mix, giving the a business edge in times of technology/venue characteristic change – normally bought about by an outage or changing load somewhere in the ecosystem
Bob Giffords, an independent banking and technology analyst, who moderated the EFITS panel, said: “Increased competition and rising costs as we get closer to zero latency means that other key performance indicators such as jitter and reliability come into play.” Perhaps jitter could include the control metrics that go with the HFT engines.
I’m sure everyone would like to think that future ‘flash crashes’ will become a thing of the past as regulatory bodies continue to investigate HFT and its market impact. However, I think we are only just beginning to understand the nature of the controls and telemetry needed to feel really safe.
CEO of ITRS Group
About ITRS Group
ITRS Group is the leading provider of risk mitigation solutions to global financial institutions. It leads the way in a new discipline which extends real-time monitoring into a comprehensive operational and service management solution. Providing innovative businesses with the visibility necessary to identify, analyze and mitigate risk, ITRS Group has been recognized through industry awards for its innovation and customer support. ITRS’s products are specifically designed to reduce service disruption, improve IT efficiency, and ensure that critical operational processes are executed as planned, protecting against both business reputation and trading risks.
ITRS delivers proactive, predictive real-time monitoring and management with specialist interfaces for over 100 key third-party trading and risk applications, including core financial market trading applications, services and execution venues – a prerequisite for effective system control. A unified view and full visibility of complex environments is provided through the Geneos dashboard, giving a complete end-to-end view of all systems. Disparate data is aggregated, creating a single source of actionable business intelligence, giving the ability to predict and act to prevent problems, enhancing risk management and minimizing latency, all at ultra-high speeds.
Established in 1997, ITRS has offices in London, New York, Hong Kong and Manila supporting clients worldwide including banks, brokers, exchanges, hedge funds and data vendors. ITRS has over 600 Geneos installations, implemented in 60 leading financial institutions, including eight of the top ten global investment banks. ITRS was acquired by The Carlyle Group on the 26th September 2011.
For more information visit www.itrsgroup.com or email firstname.lastname@example.org
Tel: +44 (0)20 7250 4770