Latency, leased lines and Sweden

[alpha_monkey]

Hi there,

Could anyone kindly help me on the following?

Theoretically speaking: I'm a professional, arcade style scalper who wants to trade out of Sweden. Speed of execution is paramount. IT expenses are, relatively speaking, not too much of an issue.

Is there an optimal way to reduce my latency to the exchange?
Would a leased line to the exchange be required?
What sort of latency would one expect from Stockholm to London in ms?

Any advice gratefully recevied.

Cheers,
AM

 

[alpha_monkey]

Hi there,

Could anyone kindly help me on the following?

Theoretically speaking: I'm a professional, arcade style scalper who wants to trade out of Sweden. Speed of execution is paramount. IT expenses are, relatively speaking, not too much of an issue.

Is there an optimal way to reduce my latency to the exchange?
Would a leased line to the exchange be required?
What sort of latency would one expect from Stockholm to London in ms?

Any advice gratefully recevied.

Cheers,
AM

Any takers?

 

[jmreeve]

To connect to the exchange gateway directly you will probably need a point to point connection.

An international connection of this sort will be seriously expensive + exchange connection costs on top.
If you are not generating more than £100K per month then I doubt it would be worth it.

Why not just route through a good bank or broker?

 

[Directional]

if you are doing arcade style trading your latency will comprise of two stages:

1. From your system -> your clearers exchange gateway. If you are trading from an arcade office in Sweden you will be on the LAN and this will probably be <1ms assuming the gateway is on the LAN.

If your system is remote from the gateway then order transit will be affected by the route - if this is being done via VPN then your constraints will be bandwidth, number of hops, distance etc.

2. once your order hits the exchange gateway, you are onto a clear network that is essentially "exchange side" so your order will be sent via the exchange lines into the exchange, matched and confirmed back. This is the quick part, though obviously distance does affect transit time nominally, as does the number of users per gateway (traffic) etc.

Will you be trading from an arcade or are you planning to trade from a cosy fireside trading station in a hillside swedish log cabin? are you going to be using TT or similar?

 

[jmreeve]

Normally there is another link in the chain.

You will route to someone that will then forward that order to the exchange gateway using
their own comms infrastructure. Bandwidth is expensive so some companies will use thinner pipes
to keep costs down. It is possible to route through one company and clear through another.

I would be surprised if you get latency as low as 1ms from your systems to
however you are routing through.

 

[Directional]

jmreeve, quite right. there are several different configurations, i was thinking very broadly.

for the 1ms i was thinking of the hop across the office to the gateway, from there onwards its obviously a different story.

I'm not exactly sure what refco's order latency was when I was there, but it sure seemed quick, the IT setup there is very good. An ISV firm I was working with in London showed me some of their LIFFE response times and their average order message submit to order message confirmed time on the Connect system was 25ms which is certainly exceptionally fast - so thats probably about the lowest speed anyone would be able to get, since they were sat on their own gateway and had an extremely highly optimized network setup for trading.

 

[blackcab]

Bandwidth is much cheaper than a few years ago. MCI (now Verizon Business), Teliasonera, COLT or BT could all do a point-to-point Ethernet connection from Stockholm to London for not that much and it would be dedicated bandwidth (known as EPL - Ethernet Private Line). You could choose what bandwidth you wanted as well, in small increments. The bigger problem would be the joining both ends of the line up to the clearing house, exchange, arcade etc. - whatever your configuration is.

 

[jmreeve]

Yes, in the office on the LAN will be <1ms.
It is from that point on that everything gets slow.

If you are trading off a screen then the human reaction time is ~100ms so anything
less than this is not going to offer any benefit.
If you are running algorithms or doing stat arb then milliseconds are important.
Some of the US brokerages e.g Genesis have fat pipes and ping times of a few ms to the ECNs.

blackcab-
Not sure what you mean by "not that much" but my experience is that connectivity can be a very significant cost to a trading business especially if you are out in the sticks a bit.

 

[Directional]

getting a little bit off the original topic slighly, but there is a neat little reaction time tester here: http://www.getyourwebsitehere.com/jswb/rttest01.html

my avg reaction time is around 170-200ms. in the scheme of things the sort of speeds we're discussing arent really likely to be noticeable to the human eye.

 

[jmreeve]

I try to avoid any strategy where speed is the advantage as the large banks will always have
better execution than I do. Easier and cheaper to find another edge.

 

[jmreeve]

Just had a chat with one carrier to see if things had come down much in price.

From my site into London (~45Km) was given an indicative quote £40K pa for 10MBPS private ethernet
and £11K pa for 2MBPS point-point leased line.

Within central London and around the Docks is much cheaper but I would not expect it to be any less going from London out to Sweden.

 

[JTrader]

If the difference between trading with a normal broadband connection with data being received and trade orders being sent via the Internet, as opposed to a direct connection to the exchange, with a resulting maximum delay of maybe 1/10th of a second, is it really such an issue for any trader?

Is anyone able to operate at such a speed whereby 1/10th of a second makes a significant difference to the outcome? (besides Asafa Powell et al).

Cheers.

 

[jmreeve]

With a broadband connection you have no guarantee on latency or whether you will even be connected in most cases. Hence, professional traders do not usually use the internet.

 

[JTrader]

jmreeve - With a broadband connection you have no guarantee on latency or whether you will even be connected in most cases. Hence, professional traders do not usually use the internet.

Point taken.

Arbitrageur - getting a little bit off the original topic slighly, but there is a neat little reaction time tester here: http://www.getyourwebsitehere.com/jswb/rttest01.html

my avg reaction time is around 170-200ms. in the scheme of things the sort of speeds we're discussing arent really likely to be noticeable to the human eye.

This addresses my point in my previous post.
My average reaction time was 0.24359999999999998 seconds, comparable to a blink of the eyes I suppose.

 

[alpha_monkey]

Many thanks to all for the comments and suggestions.

Arb - Will you be trading from an arcade or are you planning to trade from a cosy fireside trading station in a hillside swedish log cabin? are you going to be using TT or similar?

The whole idea is still very much theoretical at this stage. I'll possibly be trading as an individual using CQG & TT from a penthouse suite, teaming with fit birds. Or more likely, from a suitably grim, serviced office in Stockholm.

Cheers,
AM

 

[Directional]

I'll possibly be trading as an individual using CQG & TT from a penthouse suite, teaming with fit birds.

:cheesy: i like the theory!

should that have been "tag teaming" or did you mean "teeming"? hehe! Either way sounds a good plan, judging by the swedish lasses i've encountered..

 

[alpha_monkey]

:cheesy: i like the theory!

should that have been "tag teaming" or did you mean "teeming"? hehe! Either way sounds a good plan, judging by the swedish lasses i've encountered..

hahaha, love your work.
an eye for detail and blonde women. what a combination.

 

[dcraig1]

This article, although a little dated, mentions a target (and reading between the lines, a somewhat optimistic) execution time of 100 millisecs for CME. Add in other delays such as checking margin requirements, and any advantage of leased over switched (eg ADSL or cable) may not be as significant as it might at first seem.

http://www.computerworld.com/hardwaretopics/hardware/server/story/0,10801,96842,00.html

 

[alientrade]

To pitch in my 2 cents worth, i once traded from hong Kong and singapore with arnd 300ms Ping to my broker in NY and it was just horrible, markets makers were jumping in front of my bids and offers even before i could see my bids/offers coming up. I think for scalpers like us who trade off the times and sales or the Level 2 box, speed is really critical.

On another note, I dont think that leased lines are that expensive, i got a quote for a private leased line from London to NYC for about 2k USD for a 2mpbs line, not sure if that is accurate.....

 

[flytrade]

Hello,

I just read your comment and I am interested if you pursued trading from Sweden? As I am from Sweden myself now trading in a London office I am considering trading from Sweden or some other countries in not too a distant future. Would be greatly appreciated if you could give me some insights of what your setup now is, what kind of connection you have if you tried the braodband option or leased line or whatever you now have. Would also like to know in your opinion if scalping for example the dax if that is a problem with only a broadband connection.

Flytrade