Network latency is one of those issues, while not necessarily noticeable if you're sending a non-critical an e-mail, it is noticeable to the financial trader who could potentially lose millions from a lost trade to a competitor.
Not being from the financial sector, I did not think about the low-latency idea much until I met Andy Bach, SVP and Global Head of Communications for NYSE Euronext. At that time, NYSE Euronext was building two new data centers itself with 100 Gbps capabilities.
A known advocate of low latency networking, Bach once told me latency could mean lost business. "In our industry, latency equates to a large extent market share," he said. "He who connects the order faster gets the order, so anything we can do to speed that up is a good thing."
Similarly, Thomson Reuters took matters into its own hands with some help from Savvis to build its own network called Elektron. Operated through a partnership with data network provider Savvis, the Elektron network will create a fiber-based network that will include six strategic hosting centers in the places you'd expect (New York, Chicago, London, Frankfurt, Tokyo and Singapore) with three other locations (Brazil, Hong Kong and India) to be lit later in the year.
And while NYSE and Reuters took control of their respective networking destinies, the call for low-latency network offerings is being heard by the service provider community.
A group of incumbent (Verizon) and even competitive providers (Intellifiber, Level 3, Optimum Lightpath, RCN Metro and XO Communications) have all launched some low-latency service targeted at financial firms.
Of course, none of these operators are chasing this opportunity the same way.
In Level 3 Communications' case, the financial community was not its initial target for its low-latency service set. After installing a back office capability to help its sales team predict and measure network latency between two network points, Level 3 told me they started to see a demand from financial firms for high performance transport products.
"We built all that back office capability and it came online early last year and it was good timing because we saw the financial community start to warm up to this need to have low latency circuits," said Paul Savill, senior vice president of product management for Level 3. "We saw that primarily starting between New York and Chicago, but then we have seen that since it grow to London, Frankfurt, Washington, D.C. and Toronto, Canada."
Then there's Verizon. Taking what could be seen as a consultative approach, Verizon actually has developed a solution that's directly catered to the financial community. Verizon can give the customer simply a managed Ethernet-based service with all of the bells and whistles you'd come to expect with any network offering (i.e., high availability, SLAs, uptime, etc) or provide a customized solution.
"Latency is becoming very mission critical and the trading volumes are growing because of high frequency trading and other algorithmic type trading strategies," Sharma said. "Taking it to the extreme from a latency perspective many trading companies are looking to collocate their trading infrastructure almost right next to exchanges matching engine in the same data center facility as part of the overall trading ecosystem."
Delivering these services is not for the faint of heart, however. Financial houses won't tolerate any issues as it could mean lost business so service providers will need to obviously ensure any circuits going to these locations are tight as a drum.
But as we all come out of this tough economic crisis, service providers should look for ways to sharpen their networks to meet the financial community's cry for life, love and the pursuit of low latency. --Sean
