Architects of Electronic Trading: Technology Leaders Who Are Shaping Today's Financial Markets

CHAPTER 10

Trading Systems

Dealing with Velocity

In this chapter, leading technologists from CME Group including chief information officer Kevin Kometer and managing directors David Hoag and Ian Wall discuss their insights on how the industry is harnessing technology to further reduce latency, enhance transactional consistency, as well as make markets safer. Theirs are valuable perspectives on how the industry is dealing with velocity on a variety of levels.

Advances in technology, chief among which is the widespread adoption of co-location services, have significantly accelerated the pace of trading; on exchange and alternative trading platforms, in some cases execution takes place on the sub-millisecond level. In just one example, CME Group, a leading provider of listed derivatives across all major asset classes, cites order execution round-trip times of under one millisecond for orders originating from within its co-location facility. Trading is faster than ever before.

Trading systems will continue to become faster as new technologies are introduced. But the relative importance of additional increases in speed may be diminishing. A new trend is emerging in financial services: the prioritization of consistency in round-trip times over further, incremental reductions in latency.

The advantages and disadvantages of the reduction in transactional latency have been hotly disputed. One thing that the financial industry as a whole can agree upon is the need for added safeguards to ...