Experience capital gains using Low Latency Trading infrastructure

Capital Markets live and work on just one thing – Speed. Speed is seen in terms of speculation, execution and analysis. However, in the world of capital markets, the tick price of the financial instruments changes rapidly. In such scenarios, sometimes there is a delay between execution of orders and change of tick price. This delay is termed as Latency.

It’s high time since capital markets have shifted into the electronic domain and employ the use of computers and networks. Electronic Trading has taken place of traditional ring trading and is now governed by the control of exchanges. However, most of the times, the stock prices seem to change in a fraction of milliseconds and a time gap is introduced before the updated prices are visible to the users. To tackle this delay, exchanges and firms are constantly looking to implement a low latency trading infrastructure.

Latency introduced in the realm of capital markets is of two types. First type involves the delay between the actual price and price shown on the screen. The second type of delay involves the difference between the price at which order is placed and what it gets executed. Market participants and capital firms are constantly striving to reduce the latency in order to gain a competitive edge.

Many of the leading IT firms came up with a solution to inhibit or reduce latency significantly. They have introduced an infrastructure of systems, which comprises of high speed network connections and fast trading platforms. The collaboration of both these entities is believed to decrease the problem of latency. The infrastructure developed is called Low Latency Trading Infrastructure and is actively deployed on leading stock exchanges around the globe.

The first component comprises of network elements for connectivity. High speed routers and reliable internet connections are used. Further, to tackle issues of disconnection, leased lines are used. Internet Service Providers (ISP) provides data lines from servers having the least downtime. Thus, any change in the stock price will be immediately given to the trading software.

The second component consists of high speed trading platforms. The systems work on real time basis and instantly show responses displayed. They also facilitate instant order placements and the turnaround time taken to place an order from the user terminal to the exchange is dramatically reduced. Apart from this, all the tick prices are displayed on the client’s terminal on real time basis. So, instant change in price is quickly visible on the trader’s screen.

Low Latency trading platform has been implemented by New York Stock Exchange in association with popular investment and capital trading firms. It has immensely improved the scope of trading and helped individuals attain profitable returns.

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