City figures have warned that London is in danger of becoming a stock market backwater, with large floats now almost certainly heading to rival financial centres such as New York, Hong Kong and Shanghai.
There has been concern for months that London shares are unattractive, being shunned by pension funds due to unhelpful regulation. A lack of floats in 2023 has significantly impacted City revenues, which is concerning, considering that there is plenty of money in London to invest in aspiring and innovative companies, but conditions have to be right; the threat of recession and inflation are unattractive to investors. So for the time being, multi-billion IPOs are likely to be the domain of New York, Hong Kong and Shanghai.
This backdrop in London makes it more important than ever for financial traders to work with an organisation that provides agile, turn-key access to global markets, avoiding the overheads of building and maintaining the underlying components of infrastructure themselves. With this model, traders no longer need to lease racks in an exchange colocation facility, buy expensive cross connects to the exchange switches for trading access, and invest in a network backbone to supply the vital market data feeds needed to fuel trading. Instead, they are free to lease space and connectivity, tapping into the network wherever they want to trade, be that London, New York or Hong Kong or any other financial centre.
Traders also need reliable connectivity and market data feeds to drive their trading. Companies such as TNS provide all of this, specialising in building shared networks and colocation footprints, offering trading firms access to market data and trading connectivity on demand. By using these shared infrastructure services, traders get the benefits of expertise and technology, at a fraction of the cost of doing it for themselves.
Ultra-low latency is vital for algorithmic trading and trade execution speed is critical to ensure the best market prices are capitalized upon. The best low latency strategies depend on powerful servers housed close to exchange matching engines, be these in Europe, the USA or Asia.
Processing close to the source of the input data provides the lowest possible latency between input and response – and speed matters. TNS’ ultra-low latency Layer 1 technology, for direct exchange access within the data centre, was the first of its kind to be offered and deployed in Europe and remains one of the most advanced solutions in the market. It has also eradicated the need for multiple switches, as TNS designed a single-hop architecture to deliver direct exchange connectivity in as little as 5 to 85 nanoseconds – impressive when you consider that the human eye takes 400 nanoseconds to blink.
Several factors affect latency, especially hardware location and the resiliency of an infrastructure’s architecture, but it’s not just important to drive latency lower in the colocation facility where orders are being executed. A key competitive advantage comes from having the best communication links into the colocation facility, to ensure traders can control and coordinate activity between different locations and markets. In fact, a complete solution must consider all the components that support a trader’s strategy in detail. This requires highly specialised knowledge and engineering capabilities, including the specifics of each trading venue and data feed, that is required to support strategy.
Thanks for the post Jeff Mezger who is Vice President of Product Management at TNS with responsibility for its managed services for the financial industry. He oversees product development and strategy for market data, online and data centre services.
