As the London Stock Exchange today postponed the launch of a Linux based system billed as breaking speed records, other trading venues – including in New York, Singapore, and elsewhere in the UK – expressed their desire to deliver faster technology.
The new LSE environment was developed in C++, and runs an Oracle database linked in to a customised version of Linux for its matching engine. Its network uses Cisco and Juniper switches.
A fortnight ago, the LSE announced that its trades were being conducted at an average of 126 microseconds – a figure largely accepted in the industry as a record for live use.
But only five days after its announcement the LSE faced a potential contest when the New York-based NASDAQ exchange, whose Genium INET platform runs on Linux in a reported C++ environment, said it had delivered an average 97 microsecond latency during a week in mid-October. In its Nordic markets, it said it was “capable” of continuing to deliver sub-100 microsecond latency on average.
Importantly, however, NASDAQ is understood to quote 250 microseconds to clients because of peak trading loads at the start and end of trading days, a challenge for all markets.
The Singapore Stock Exchange, which is buying in the INET platform from NASDAQ, has said in recent months it achieved 90 microsecond times in benchmark testing, on Voltaire switches and HP ProLiant blade servers. That system will go live next year and then accurate live measurements can be taken.
Other reported speeds at major venues include 250 microseconds for BATS and NYSE Euronext, and 350 for Chi-X.
The speed battle between exchanges has increasingly been termed a ‘technology arms race’. Last month, the LSE vowed to continue improving speeds, saying that it intends to “compete, and compete strongly”. NASDAQ said it is “committed to innovation through technology” to be the “driving force” among exchanges.
The Singapore Stock Exchange claimed instead that it was the venue “raising the bar for speed, capacity and scalability”.
But much faster speeds are reportedly available in one new system not yet running on the large exchanges. Algo Technologies, founded by Hirander Misra, former chief operating officer at LSE rival Chi-X, claims it can deliver 16 microseconds latency, a tenth of current LSE speeds. It also uses stripped down versions of Linux, crucially running on high-spec blade servers.
That speed was benchmarked by independent firm Corvil, but was measured in test conditions rather than a live environment. Algo Technologies was established this year, and its first major matching engine implementation will be in the UK’s Plus Markets venue over the next 12 months. It claims that the testing was conducted at volumes of messaging that will exceed even the heaviest loads exchanges tend to experience.
The standard process to calculate latency is to measure the time needed to accept, process, and acknowledge or fill an order. Nevertheless, after the LSE claimed it had the fastest speed, a number of readers questioned the claims, because of measurement transparency concerns.
“Hooray for Linux,” wrote one. “I think Linux is a good choice for truly reliable systems,” wrote another.
But in one comment, the writer said: “When numbers are coming from the venues they should not be taken seriously. They are just a number without a context.” Many of the exchanges guided on the figures for latency, but declined to provide much technological detail.
There was also a split opinion on what technology is really responsible for the speed. Hirander Misra, chief executive at Algo Technologies, said the customisation of systems is key to delivering speed. “Most exchanges using Linux have stripped it down to a bare bones version, designed to run fast under these conditions,” he said.
Another important factor in speed is the development environment. Observers largely agreed that over recent decades, most exchanges had effectively gone full-circle, from C environments to Java and back to C++.