BATS Global Markets has agreed to acquire specialist electronic trading rival Chi-X, and promised to replace the Chi-X matching engine with its own Linux-based technology.
Chi-X is understood to have been looking for a replacement for its Instinet matching engine, which also runs on the open source operating system.
“We will be migrating Chi-X to our own trading platform,” a BATS spokesperson confirmed to Computerworld UK. BATS’ platform runs on a Linux-based datacentre and is hosted by Savvis – with servers in Docklands in London for European traders, and in New Jersey for the US.
Exact details of BATS’ matching engine remain under wraps, however it is recorded as delivering 200 microsecond round trip average latency in live use, with a further latency cut expected to be announced in the coming weeks. “We first developed the BATS trading system in 2005, and since then it has been upgraded a number of times, cutting the latency down to 200 microseconds,” said the BATS spokesperson.
The speed goes up against a faster 125 microsecond latency on the London Stock Exchange. But stability and capacity are also highly important issues, and BATS claims to have achieved a stable and notable one million messages a second processing capability, albeit in a test environment. In live use, numbers will be lower, but the figure provides an indication of potential capacity.
BATS said that with Chi-X sharing its focus on low latency platforms, and both firms wanting to grow their scale, the deal made strategic sense. Over recent years, the companies have made use of their advanced technology to chip away at the LSE’s dominant marketshare, cutting what was once a near monopoly by the established exchange down to around 60 percent of trading in London-listed stocks.
BATS traders work for a range of high profile financial institutions, including Citi, Deutsche Bank, JP Morgan, Barclays Capital, Goldman Sachs, HSBC, Nomura and the Royal Bank of Scotland.