Bringing Global HFT Data Centers Up to Speed
December 21st, 2011 By: Industry Perspectives
Brandon Lee, the Chief Strategy Officer of NTT Com Asia, is responsible for shaping future direction of the company, identifying and commercializing new technologies, and leading the company’s Global Network Business and New Business units.BRANDON LEE
From New York to London to Tokyo, the hot buzz words “High Frequency Trading (HFT)” and “algorithmic trading” have been making their rounds on the world’s largest stock exchanges. They have revolutionized the way deals are made, where financial transactions are made by computers capable of buying and selling shares at microsecond speeds.
This fast-growing HFT trend is expected to gain ground in Asia in the next few years. To develop and compete on the world financial arena, the major Asian financial markets — such as Hong Kong, Tokyo and Singapore — need to stay abreast of this latest trading trend to remain competitive. Next generation infrastructure is under development in the race to bring Asia up to speed, literally.
Two Main Types of Data Centre
From our perspective, there will be two types of data centres in the near future. The traditional Internet data centres (that we’re all familiar with) will remain to serve current needs and demands such as basic Internet content, in terms of network connectivity and colocation. However, the interesting point to note is that a new generation of data centres is emerging to meet the stringent needs of specific industries for low latency and reliability, such as the financial industry.
In a government-sponsored study by Frost and Sullivan, data centres have been identified by both industry players and stakeholders as a critical infrastructure for Hong Kong’s economy. It also highlighted that data centres are important infrastructure that supports the operations of key industries, including financial services, among others. We believe that for financial players, the optimal trading setting is achieved by pairing worldwide market connectivity with the right data centre environment.
Case Study of a Financial Facility
NTT Communications has broken ground on Hong Kong’s first Financial Data Centre (FDC), which will be completed by 2013. The FDC has several design considerations that are key to its viability. Firstly, with the micro-second speeds needed for HFT and algorithmic trading, the lowest technologically possible latency for connectivity is essential. This is achieved through 2 factors: physical proximity and a comprehensive ultra-low latency network solution.
Let’s use this new FDC as an example. It is physically located next to the Hong Kong Exchange’s upcoming new data centre in Tseung Kwan O, which is an advantage that cannot be replicated. FSIs who house their systems within this FDC will have a competitive edge in microsecond trading strategies. To put into perspective, a performance advantage of a few milliseconds over a rival broker can be worth millions per year.
Connectivity is Critical
The FDC also colocates with the cable landing station for the Asia Submarine-cable Express (ASE) and the network node of NTT Communications’ global network. The ASE has a total capacity of 15 terabits per second and delivers ultra-low latency connection among the financial hubs of Japan, Hong Kong and Singapore, eliminating backhaul by local carriers. This connectivity is extended out of Asia to USA from Japan via shortest possible route on Pacific Crossing (PC-1) international submarine cable, for a geographically larger ultra-low latency footprint.
Availability & Redundancy
Secondly, availability and redundancy is another important factor for HFT. When financial business electronic platforms experience any downtime at all, the loss is typically measured in the millions or more, not to mention the damage done to reputation. This is why absolute availability is a must for financial-grade data centres.
Tier IV infrastructure provides the highest level of redundancy in the industry with a 99.99% uptime guarantee, which is especially critical for the financial industry. According to the criteria by the Uptime Institute, all Tier IV ready infrastructures must be able to withstand critical incidents and natural disasters like earthquakes, fire and leaks. We fully expect that this will lead to a spike in demand for Tier IV infrastructure.
Flexibility & Scalability
Thirdly, flexibility and scalability are also critical. With the fast pace changes in the financial industry, FSIs has to be agile and nimble in maintaining their IT infrastructure, in order to react instantly to market changes. FDC’s modular infrastructure design allows for highly customizable hybrid tiering, to suit different transactional needs. In offering data centre services, Tier III+ infrastructure can be used as a foundation, and can be upgraded to the more stringent Tier IV standard as needed, while utilizing a fundamentally robust configuration for current levels of usage.
In planning for and building a Financial Data Centre, the challenges and additional investment required is much more demanding, but with market changes and developments in the global financial industry, it can mean tremendous opportunities for data centre vendors and FSIs alike. Given the potential advantages, it’s definitely worth considering this leap to put yourself ahead of the competition.
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