High Performance in Trading

September 19, 2011

Raymond Russell, CTO

Agenda

Low-latency = high performance?

• Low-latency components

• Trading system performance

• Beyond latency

Market-leader in Latency Management:

• Over 20 market maker and proprietary trading firms

• 9 of the G14 group of broker/dealers monitor order flow performance

• 7 out of the top 10 investment banks as active customers*

• 18 additional tier 2 banks and brokers

• 15+ market maker and high frequency trading firms

• 14 exchanges, including 10 major global exchanges

*Source FT.com League Tables, % of Equities Fees collected in Q1 2011

Sell-Side

Exchanges

Providers

TradingNetwor

k

Buy-Side

Introduction to Corvil

For components, basically true:

• Matching engine: order to execution

• DMA engine: risk-checking and change-of-custody

• Feed-handler: exchange-tick to book-update

Low-latency = High Performance?

Low-latency = High Performance?

Trading imperatives driving high-performance:

• Lifting trades before the competition does

• Response time and speed of access to market

• Execute trades at optimal price and speed

• Scale and timing

• Competitive but profitable spreads

• Tracking the market to keep books balanced

Arbitrage Trading Market Making Algorithmic Trading

Low-latency = High Performance?

Q. How to measure algorithm performance?

• Execute trades at optimal price and speed

• Scale and timing

• Execute trades at optimal price and speed

• Scale and timing

Many fast orders?

One long transaction

?

Market slippage?

Algorithmic Trading

Low-latency = High Performance?

Q. How to measure algorithm performance?

A. Tick-to-order latency

• Performance determined by system latency:

Quote Market-data Strategy Order-entry Trade

Market data

Order

• Execute trades at optimal price and speed

• Scale and timing

• Execute trades at optimal price and speed

• Scale and timing

Algorithmic Trading

Low-latency = High Performance?

Q. What drives component latency?

A. In well-designed and well–tuned components, load drives latency

Latency in absence of load a sign of poor design or configuration

Feed-handler latency

Market-data rate

Summary

• Latency a critical performance metric for components

• High-performance trading demands system-wide performance

• Capacity under load as important a dimension as latency