Messaging Spike Threatens Data Capacity12.19.2011
OPRA projects 6.5 million messages per second by mid-2012.
A spike in messaging volumes caused by the growth of high-frequency and algorithmic trading is threatening to overwhelm the networking capacity of even the largest trading firms.
“Individual dealing room may have to deal with 6 million messages per second,” Chris Pickles, head of industry initiatives at BT Global Banking & Financial Markets, told Markets Media.
This will entail massive changes in the systems infrastructures used at trading firms, which hitherto have been designed as silos to support specific asset classes or lines of business.
“At some point, financial institutions will need to wake up to the fact that they’ve been designing systems on an ad hoc basis, and will need to develop cloud-based solutions due to the sheer volumes of data,” Pickles said.
The U.S. derivatives markets are experiencing exponential increases in message traffic.
The Options Price Reporting Authority projected at the beginning of 2011 that firms would need 1.27 Gigabits per second (Gbps) of bandwidth to handle its consolidated feed of US options quote and trade data by July 2011, representing year-on-year growth of 115 percent over the 590 Megabits per second (Mbps) required in July 2010.
The growth rate was predicted to slow between 2011 and 2012 to 23 percent, translating to bandwidth requirements of 1.57 Gbps by July of 2012.
OPRA projected that firms would need capacity to handle 5.257 million messages per second (mps) by July 2011 and 6.537 mps by July 2012.
OPRA’s projections are based on average of message peaks at one-second intervals, which better reflect system utilization during bursts of traffic, while earlier projections were based on five-second intervals.
Algorithmic trading strategies have resulted in smaller-sized orders but greater volumes of orders, as institutions seek to slice up their orders in order to avoid revealing their positions to the market.
“As a result of the technology being used by investment firms to reduce market impact, an average retail order in the U.S. is now larger than an average institutional order,” said Pickles.
A great deal of confusion surrounds high-frequency trading. There’s a fundamental difference between high-speed trading, which is about executing trades quickly, and high-frequency trading, which is trading at very short intervals, notes Pickles
The thrust of regulatory inquiries around HFT seem to reflect a binary view of HFT as being either good or bad, when the reality is it’s neither.
Allowing algorithms to control the supply and demand of crypto was challenged by Terra Luna.
Infrastructure and sustainability will be one of the biggest opportunities in alternative investments.
The broker's algo development team gains access to high quality, granular Level 3 data.
Bank aims to gain share from its systematic approach to trading, market structure proficiency and modern techn...
The firm will be rolling out algos for institutions to navigate crypto market structure.