OpenMarkets

Electronic Trading: Is Speed Really What’s Most Important?

Oct 22, 2012 || Ari Studnitzer || 2Comments

A few weeks ago, one of the biggest events in recent history in electronic trading happened and most people didn’t even know it.  That’s because it occurred without any significant operational impacts and was executed to the highest standards of quality our customers and our partners expect and rely on from CME Group.

On August 26, we began the first phase of the CME Globex performance updates, which as of this past weekend are now complete.  We have now entered an entirely new chapter in the evolution of  Globex since its launch in 1992.  You read a lot about speed these days, and CME Globex is fast (the first phase of the Globex performance release had a median inbound latency of 52 microseconds from the router to the match engine).

But as we’ve written before, just like IQ is a threshold measure in predicting wealth, it takes more than one element to be successful and a leader.  Customers around the world tell us time and time again that they don’t just care about how many orders can be processed in the blink of an eye or the transparency of performance metrics – they need liquidity on global benchmark products, operational excellence, and customer margin efficiency.

This latest set of performance enhancements follows a long-standing emphasis on strong risk management practices and trading controls.  Just as brakes on a car allow it to go faster, we have long focused on our trading controls introducing stop-spike logic in 2004, the CME Globex Credit Controls system in 2008, and the CME Risk Management Interface in the first quarter of 2012 to allow FCMs to block and cancel orders.

The latest release was rooted in feedback from customers and focused on the real driving factors of electronic trading today, which is not speed, but efficiency, effectiveness and market integrity. We achieved this by focusing on value and the customer experience with increased capacity, consistency and predictability of our platform.

During the process of rolling out changes, we focused on consistent inbound order entry, predictable outbound market data dissemination, and deterministic processing of outbound order entry messages relative to market data.  The results exceeded our targets (all data in microseconds from the trade date of October 15, 2012):

• Inbound order entry latency variability of 39 microseconds. (Median latency relative to the 95% latency of the egress of CME Globex router through the iLink Gateway to the ingress of the CME Globex match engine)
• Outbound market data dissemination latency variability of 58 microseconds (Median latency relative to the 95 percent latency of the egress of the match engine to the egress of the MDP Gateway)
• 99 percent of outbound market data dissemination latency outside of the engine within 10 microseconds of 99 percent of outbound order entry latency outside of the engine

Globex also provides a high level of performance and functionality with our implied trading capabilities, 10 matching algorithms, near 24-hour trading, industry-standard FIX order entry and market data interfaces, global network backbone facilitating 20 percent of Globex volume outside of U.S. trading hours, and CME Globex hosting or global order routing to eight premier global partner exchanges.

CME Group is committed to providing a fair, reliable, consistent and predictable trading experience for all customers and trading interfaces.  In the coming weeks and months, we will continue to execute against our defined roadmap to increase the predictability of order entry, market data and order entry relative to market data.

While trading speed matters, low latency is a necessary byproduct of a solution focused primarily on market integrity – one that includes a predictable trading environment in liquid markets.

Isn’t that a solution that any market participant would want?

Read More:

Latency and the Exchange Ecosystem