Latency Matters

Low latency is a topic within capital markets, where the proliferation of algorithmic trading requires firms to react to market events faster than the competition to increase profitability of trades. There are many factors which impact on the time it takes a trading system to detect an opportunity and to successfully exploit that opportunity, including: Distance between the exchange and the trading system.

A crucial factor in determining latency is its throughput. Data rates are increasing exponentially which has a direct relation to the speed at which messages can be processed. Low-latency systems need not only to be able to get a message from A to B as quickly as possible, but also need to be able to process millions of messages per second.

There are in practice several routers, switches, other cable links and protocol changes between an exchange and a trading system. As a result most low latency trading engines will be found physically close to the markets exchanges, even in the same building as the exchange (servers co-location hosting) to further reduce latency.

Co-location can greatly benefit traders who are running automated trading systems, from greybox to blackbox. Taking advantage of server co-location brings traders strategy as close to the exchange matching engine as possible, significantly reducing execution times, as well as the risks of multiple points of failure. With remote access to co-located servers, traders can also enjoy the freedom to trade quickly and confidently from anywhere around the globe.

The CME Group Data Center in Aurora, IL provides traders with the closest proximity possible to the CME Globex matching engine. Now with up to 10 Gbps GLink, the fastest connection to CME Globex possible. CME Aurora Dedicated Servers allocates all of the hardware resources to one trader. This provides access to much more CPU and RAM than a typical virtual machine (VM) and is ideal for the most demanding traders running automated and algorithmic system trading.