By Michael Lacasse
Director of Technical Account Management, Lightspeed Institutional
Everything is getting faster. Not so long ago, it took days to travel from New York to London; now, it only takes a few short hours. Even the way we eat – with the proliferation of fast-food outlets with drive-thru dining options – has increased greatly in speed during the last 50 years. Things have become instant, on demand and with no lag time. Even being forced to wait to download a movie or music seems so yesterday. Nowhere is this quickening more evident than in the financial markets. I distinctly remember trading in the early 1990s by calling in a stock order via telephone to one of the original discount brokers. The broker in the office would then transmit the order to a clerk on the floor of the exchange who would literally run the order ticket to a specialist for execution. It would sometimes take quite awhile for the fill to be relayed back for confirmation. Man, have things changed since then!
This is particularly true at the Nasdaq. Just a year ago, data delivery speed was measured in microseconds; now, it’s measured in nanoseconds. A microsecond is one millionth of a second, while a nanosecond is one billionth of a second. That kind of speed is difficult to even comprehend. A good way to think about this kind of speed is to visualize traveling 300 feet versus traveling five miles. At the speed of a five microsecond feed, you would have traveled 300 feet. Traveling at 300 nanoseconds, you would cover five miles. This is uncannily fast! Imagine the advantage this speed can provide to any trader, not just high-frequency traders.
The speed is obtained by a field of programmable gate arrays, managers for the order book and handlers for the feed. It utilizes the raw market data from the matching engines and normalizes prior to sending it to the client.
Nasdaq is the only exchange presently offering data at the nanosecond rate. However, BATS, CME, Direct Edge, ICE, NYSE, and NYSE Arca, exchanges are working on reaching this level.
It’s hard to even imagine what’s coming next in the financial markets. One thing is for certain, it’s going to be faster!
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