Dec 20, 2013
We all know that it’s the financial trading houses that are the bleeding-edge adopters of the highest bandwidth, the lowest latency and the fastest end-to-end connections, mixing dark fiber, wavelengths, Ethernet, IP Transit, remote peering, and microwaves when they have to hook up to the global trading hubs. Once these leading pack players have bankrolled the development of lower-latency solutions, they trickle down to other industry verticals — and that trickle down is turning into a cascade in areas like mobile backhaul, inter-cloud communication, and content distribution networks (CDNs), as well as global corporate backbone networks.
With algorithmic automated trading systems executing over 90% of the global futures market, millisecond response improvements means thousands of additional trades accomplished at the blink of an eye. Of course when algorithms get it wrong, spectacular volatility — like the May 2010 ‘Crash at 2:45’ — happen. The major US stock market indexes dropped by over 7% in 15 minutes before a partial rebound. Temporarily, $1 trillion in market value disappeared. The stocks of eight major companies in the S&P 500 fell to one cent per share for a short time, while other stocks increased in value to over $100,000 in price.
However, when things go right, every trading floor is looking for that microsecond of extra edge over the competition. Delivering those end-to-end services internationally and between continents, across several infrastructure provider networks, requires good research, good carrier relationships, good colo locations… and resourcefulness. Over time, we have seen some great new carriers emerge based on their connectivity refresh. A great example is the Verizon originator, MCI Communications that broke the AT&T monopoly back in 1982 by establishing a microwave link between Chicago and New York and offering faster and cheaper connectivity. Today, resourcefulness is still apparent in the first and last-mile connections from the customers’ data centers to the service provider’s colo.
One recent development in data center-to-colo connectivity is the deployment of millimeter connections (a step up from microwave). In the US for example, the 60 GHz band can be used for unlicensed short-range (1.7 km) data links. The IEEE 802.11ad WiFi standard proposed by the Wireless Gigabit Alliances transmits on the 60 GHz spectrum with data transfer rates of up to 7 Gb/s. This is generating considerable interest among financial traders.
Financial trading networks like BT’s Radianz, Orange Business Services, AT&T Financial Services, and Terremark Worldwide all operate their own global infrastructures. With such global reach they are the behemoths of trading floor communications, but they are also locked into their own infrastructures, and they have huge investments tied up in customer premise equipment (CPE) in a business environment where equipment lifetimes can vary between 4-9 months.
Smaller niche competitors like French Etrali or Canadian Custom Connect concentrate on providing best-of-breed connectivity over different infrastructure with colo providers (notably Telecity and Equinix) that operate matching physical engines for algorithmic transactions. The business edge for these financial communication minnows is to provide faster response times, faster equipment and software upgrades, and customized last-mile connections to colo sites. In a business where time truly is money, functions like performance simulations, fast ordering of new circuits, deep-dive fault-finding, proactive management, and fast response from competent engineers all define the difference between contract winners and losers.
The infrastructure providers often work with global systems integrators like CSC, Atos Worldline, TCS, Dimension Data, and IBM Global Services for all-in-one managed service solutions. This makes their solutions comprehensive, but also, at times, unwieldy. The niche service providers concentrate on delivering the fastest and most reliable connectivity with a wide range of interconnectivity options that align with customers’ existing services, apps, and hardware. With their constant surveying of fastest and cheapest connectivity options, the global minnows sometimes find themselves providing multiprotocol label switching (MPLS) services to the behemoths.
Providing services to financial trading houses is lucrative, but also very investment heavy, so niche service providers are constantly trying to commoditize them by driving down costs to make them attractive to a wider range of customers. Colos like Equinix with its Cross Connect service can play an important supporting role by creating ecosystems that allows for better interoperability between on-site service providers.
Image credit: WikiMedia Commons