High-performance network management is deployed to monitor split-second delays.

Among the technological challenges associated with latency monitoring are measurement granularity at high speeds and precision time synchronization.

“Today’s markets require nanosecond measurement on 10 Gbit/sec links,” Donal Byrne, CEO of Corvil, told Markets Media. “To measure latency, you need a synchronized time reference between all measurement points with microsecond latency.

Another important measurement is relative latency.”Everyone measures absolute latency but it is relative latency where the real value lies,” Byrne said. “Measurement of relative latency is challenging, as it typically requires information about the latency of other traders.”

The Corvil network monitoring and analysis system is designed to provide visibility into network performance at the timescales which matter for financial trading.

By deploying measurement appliances at key points within the network that monitor network traffic using either network taps or Cisco SPAN (Switched Port Analyzer) connections, Corvil is able to manage performance in each part of the network where added latency can occur.

Another major technological challenge in latency monitoring is the lack of an official latency measurement standard that allows comparison of latency measurements.

That’s starting to change. A group of industry participants have formed the FIX Inter-Party Latency Working Group (FIX IPL), which is developing a standard that will allow the easy assembly of latency information on a consistent basis across multiple organizations.

Latency transparency provides the critical information that allows a trader to assess the level of price risk for a trade opportunity and take the appropriate action.

“With respect to the trade decision process, if a trader knows that the market is experiencing high levels of latency for orders, then there is a higher level of risk that the trader will not be able to get the fill at the price advertised,” Byrne said. “Without latency transparency, the trader will be blind to that risk.”