Data & Analytics Insights

Balancing Latency and Performance with Reliability and Scalability

 

Ovidiu Campean

Director, Global Head of Product and Presales, TORA

In an age where electronic trading has become the norm and trading strategies are continually evolving, latency has become a key variable in trading performance.

  • The importance of understanding and effectively managing latency has become more important as electronic trading evolves.
  • LSEG TORA’s approach to latency recognises the key role speed plays in trading.
  • Latency and performance in systematic trading are intertwined elements, and their effective management can be the difference between success and failure of trading strategies.

Introduction

For anyone involved in financial markets technology, the term ‘latency’ is a familiar one. Latency – the time it takes for a message to travel from source to destination – is a critical factor that can significantly impact trading performance, not just for high-frequency trading firms, but across the buy-side spectrum. The importance of understanding and effectively managing latency therefore cannot be understated.

In an age where electronic trading has become the norm and trading strategies are continually evolving, latency has become a key variable in trading performance. In this article, we delve into the crucial role that latency plays in trading systems, its implications for buy-side traders, and how effectively handling high-volume periods, balancing latency and performance with reliability and scalability, can make the difference between success and failure in today’s highly competitive financial markets.

Understanding the Dual Flow of Latency

It’s essential to recognise that latency in trading systems operates in a dual flow: inbound and outbound. Both aspects are pivotal to the overall efficiency of any trading strategy.

In the inbound flow, the issue of latency surfaces in the acquisition and processing of real-time market data. This data, harvested from various exchanges and other external sources, needs to be rapidly normalised and distributed both to systematic trading strategies and to human traders. Excessive latency in the inbound flow of market data can have material effects, as every millisecond counts when it comes to the speed of decision making and acting on market movements. Therefore, an optimal trading system must be able to guarantee low latency handling of this flow, from sourcing the data to its distribution to the various end-points.

Outbound flow on the other hand, is reliant upon how swiftly and effectively orders are transmitted to the market. This represents the execution component of the trade, which demands not only speed but also reliability and precision. Undue latency in this domain can delay orders reaching their destinations and therefore jeopardise the potential profitability of trades, particularly in volatile market conditions.

Understanding this dual flow of latency — the inbound processing of market data and the outbound execution of orders — is fundamental for any trading technologist. It’s a delicate balancing act, requiring well-designed systems that are tuned to effectively manage both flows, each of which presents its unique challenges.

TORA’s Approach to Latency in the Millisecond Space

TORA’s approach to latency management recognises the pivotal role speed plays in trading while striking a critical balance with scalability and reliability. By focusing on the millisecond space rather than chasing the microseconds and nanoseconds of high-frequency traders, TORA provides consistent performance capable of managing significant data volumes without compromising latency.

The architecture of TORA’s systems allows for robust throughput capabilities at high speed. The ability to handle large quantities of data in real-time and maintain a consistent level of service is a cornerstone of TORA’s platform. Operating in the millisecond space ensures a dependable environment that can be effectively leveraged by algorithmic trading strategies.

Importantly, TORA’s approach caters well to a broad spectrum of buy-side strategies. It’s essential to realise that dependable, predictable low latency is not just beneficial but crucial across a wide range of both systematic and discretionary trading approaches. Even for strategies where millisecond differences might not appear significant at first glance – such as long-term trend-following or relative-value strategies – a consistent low latency environment can provide firms with a competitive edge. This focus on providing a dependable, adaptable platform, rather than the pure pursuit of the lowest possible latency, forms a key part of TORA’s commitment to its clients.

Maintaining Performance During High Volume Periods

Periods of high volume and market volatility present both a challenge and an opportunity to buy side firms. These demanding periods, often driven by major news events or market shifts, can put a considerable strain on trading infrastructure. Traders therefore need robust systems that can handle the deluge of data and the heightened demand for transaction processing without compromising on performance.

TORA’s approach to these periods is built on two core pillars: resilience and scalability. The platform is engineered to weather the storm of high-volume periods, while still maintaining low latency performance even under the most demanding conditions. By utilising a combination of advanced software techniques and high-capacity cloud infrastructure, TORA’s systems can dynamically scale to meet surges in volume, ensuring that critical trading operations continue unabated.

Moreover, TORA’s robust architecture minimises the risk of system overloads or outages during these periods. This stability is of paramount importance to traders, as even a momentary lapse in service can result in missed opportunities and potential losses. As such, TORA places a high premium on reliability, building in redundancies and fail-safes to ensure its systems stay operational when it matters most. The result is a platform that delivers consistent performance and reliability, even during periods of extreme market activity.

Conclusion

In conclusion, latency and performance in systematic trading are intertwined elements, and their effective management can be the difference between success and failure of trading strategies. This especially rings true in periods of high volumes and market volatility. TORA addresses this criticality by offering reliable performance, dependable latency, and maintaining resilience during peak volumes.

As we look to the future of trading, the importance of latency will continue to underscore trading strategy effectiveness. TORA, armed with robust technology and adaptive capabilities, is poised to navigate these evolving demands. The continuous challenge lies in achieving and maintaining the balance between latency and performance in a dynamic trading landscape – a task that TORA is well-prepared to undertake.

The opinions expressed are those of the author(s) and do not necessarily reflect the views of London Stock Exchange Group plc (“LSEG”), its clients, or any of LSEG’s respective affiliates. Tora Trading Services LLC is registered with the SEC and a member of FINRA, SIPC, NFA. TORA Trading Services Limited is regulated by the HK SFC. This article is for general informational purposes only, should not be taken as any type of advice, and is intended for institutional customers and eligible counterparties, as defined by the respective regulators/authorities. Not all TORA services and related services are offered via the regulated entities. In addition, TORA services are not available in all jurisdictions.

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