By: Patrick Lastennet, director of marketing and business development, financial services segment, Interxion
High frequency trading via microwave radio links is gaining momentum as the technology matures and independent vendors are emerging and making this type of service accessible to the wider colocated trading community. The practice was popularised in the U.S. by connecting the financial districts of New York City/New Jersey and Chicago to help trading firms react to futures market signals in the most timely manner. Known to offer a better than 40 percent improvement in latency over fibre connections, there’s now a rising demand for this technology among increasingly risk-sensitive firms trading European markets as they ultimately need to ensure they can enter and exit positions in the shortest possible time.
Spearheading this trend is McKay Brothers, arguably the leading low latency microwave network provider, who is progressing methodically into the significant trading cities around the world. Last month, it announced that it will deploy its lowest known latency connection between the key financial centres of London and Frankfurt, as well as London and Slough, out of Interxion’s City of London data centre campus.
Previously, traders would connect via fibre to the Exchanges hosted respectively in those locations. Though there were microwave networks, there was no direct route to central London. This first-ever London – Frankfurt shortest route is expected to save firms more than one millisecond in one-way latency between the two, Eurex and LSE, as well as other trading firms trading logic located in the City.
The partnership between Interxion and McKay Brothers is mutually beneficial. McKay can easily access buy-side and sell-side customers in Interxion’s Finance Hub – home to more than 200 financial market participants - whilst benefitting from the proximity to the London Stock Exchange. And the Interxion London electronic trading community benefits from a Microwave capability powered by an independent vendor which significantly lowers barriers to adoption.
As part of the new UK initiative, McKay Brothers has launched two products based on its microwave technology. The first is a private wireless bandwidth product, and the second is the Quincy Extreme Data service, which distributes select European and US market data to subscribers at the lowest known latency at a competitive price point. Both products support effective risk management and trading.
There are broader implications of the partnership between McKay and Interxion, not the least of which is the strengthening relationship between microwave providers and colocation data centres to optimise trading from proximity venues. Additionally, the increased adoption of microwave signals a new normal for round trip times of important trading corridors which the overall industry will have to take into account when prioritising their performance enhancing projects.