Innovation highway

  • "We've got a path that's pure wire in the sky"

    Nigel Harold, Head of IT Business Development

Connectivity and co-location are changing fast in today’s capital markets. London Stock Exchangeis at the forefront of innovative technology and processes, as Adam Cox reports. 

"Imagination is more important than knowledge," Albert Einstein once said. The maxim has not been lost on London Stock Exchange, which has made technological innovation a cornerstone of its strategy, The fruits of that approach can be seen in two areas of recent focus: connectivity and hosting.

In November 2013, London Stock Exchange launched the first directly connected wireless communication link between its City of London data centre and the Equinix data centre campus in Slough. The millimetre-wave wireless technology being used is similar to microwave, but while both technologies offer big savings in latency compared with traditional fibre-optic networks, millimetre-wave technology has certain key advantages over microwave.

“We did an extensive comparison and evaluation exercise involving a number of technologies but the millimetre-wave solution offered higher aggregate bandwidth and therefore greater flexibility for customers,” says Nigel Harold, Head of IT Business Development at London Stock Exchange.

One of the main drawbacks of microwave is that it is less suitable for data-intensive trading strategies or transmitting large volumes of real-time market data. Where microwave typically offers channels in the low hundreds of megabits per second, London Stock Exchange new wireless service provides channels in bandwidths of 1 gigabit per second.

Additional links along the network also create a straighter, more optimised path, which cuts latency further: tests indicated the expected latency savings versus traditional fibre-optic were as much as 40 per cent. The extra links build in added resilience too, which means that disruption due to external factors such as weather is less of a threat.

"One of the key reasons to go down this route was to try to maximise the reliability for the wireless network," Harold explains. "By shortening the distances between the links, that allows you to better manage the signal attenuation, which makes it a lot more robust in terms of adverse weather conditions."

The new offering was delivered in little more than nine months and implemented in partnership with NexxCom Wireless.

"The beauty of doing it was coupling an exchange with high technology in a way that was unique," says NexxCom Wireless Chief Executive Jay Lawrence. "What we have done here is taken some radio technology that NexxCom has developed over the last several years and put it into an extremely low latency circuit, which will be the lowest latency circuit ever to Slough and London Stock Exchange."

"We've got a path that is pure wire in the sky. It's all OSI Layer 1. It's using some highly innovative technology for managing the bandwidth and shaping it for customers' access. We've managed to put in a network driven by some extremely powerful technology into an application that makes it a one of a kind in the market," he adds.

The innovation came from London Stock Exchange and NexxCom but the catalyst was customer demand. The Group takes a collaborative approach with its customers on all projects, from identifying demand through to specifying requirements and understanding what issues matter most to customers.

"One of the main drivers was client demand. That's where wireless has evolved as a technology. So we looked at whether there is a trade-off between latency and availability and whether certain locations should be connected first. We've been engaged with clients from the outset," says Harold.

Tailored solutions

This type of engagement plays a key role too in London Stock Exchange’s service X2M. X2M is the new brand for the services formerly called ASP which became part of the group following the merger with Borsa Italiana in 2007. Innovation is essential given thatX2M's business is based on providing bespoke managed service solutions.

Claudio Modenesi, Head of Integrated Technology Services for London Stock Exchange, says X2M approaches each customer's needs as a unique opportunity requiring a customised solution. "That is a major challenge of our business because each new customer is actually a new project," he explains.

X2M operates from Milan, Rome, Frankfurt and London, connecting customers to several trading venues including Borsa Italiana, London Stock Exchange, MTS, BATS Chi-X, Chicago Mercantile Exchange, e-MID, Eurex, Hi-Mtf, Liffe, LMAX Exchange, NYSE Euronext, TLX and Xetra. Over the years, X2M has become a collaborative ecosystem where different financial industry participants, including ISVs, brokers, and information providers, can work together.

“X2M is always evaluating new ideas proposed by the community. We are looking to expand into other countries with new X2M hubs and widen our portfolio with new offers, such as service performance measurement” says Modenesi.

Hosting enhancements

Connectivity is a major part of London Stock Exchange's technology offering, but it only tells part of the story. Another important focus is hosting. "We're always looking for ways in which we can enhance the co-location service that clients take from us," Harold explains.

At first, co-location was mostly about low-latency access but priorities have changed in recent times.

"I think we've evolved a lot more over the years in terms of a stronger community of users. So you have a number of trading participants, non-trading participants, vendors, service providers, who all need to connect and provide each other services," says Harold.

London Stock Exchange is looking at ways to enhance some of the mechanisms by which clients can connect into the Group's markets, which can then reduce the latency and the ‘jitter’, which is the distribution of latency.

London Stock Exchange has also begun evaluating new mechanisms for clients connecting within the data centre itself, a move that could result in massive latency savings.

"We're still operating on an internal proof of concept, but we expect to reduce round-trip latency from the customer hand-off within one of our hosting facilities to a gateway that's on this distribution platform by two thirds," says Nabeel Madry, Head of Group Network Services at London Stock Exchange,

Ultra-fast, ultra-reliable connectivity is a crucial element of today’s capital markets’ environment. London Stock Exchange is determined to stay ahead of the game, providing customers with what they need now and what they are likely to need in the future.