Big stock exchanges now battling for microseconds

New view of transaction times may help change how IT thinks about speed

Computer systems, hardware and networking technologies have improved so much that two of the world's largest trading exchanges say they have begun measuring transaction times in microseconds.

What is a microsecond? It's one-thousandth of the relatively familiar millisecond -- that is, one millionth of a second. Speed like that is too fast to visualize by we puny humans.

But trading systems inhabit a Terminator 2-type world, where machine battles machine. Such systems -- which are, naturally, automated -- compete for best price as fast they can get the electrons to travel through servers and networks. With millions of dollars at stake, the IT managers who run these trading operations are continually finding ways to increase system performance, or risk losing customers.

In the past year, the New York Stock Exchange and the CME Group, which operates the Chicago Mercantile Exchange and Chicago Board of Trade, have begun to frame their thinking in microseconds as they look at some of the processes involved in their superfast transactions.

The need for microsecond measure is an outgrowth of the steadily increasing speed of transactions, which are heading into the single-digit-millisecond range. Improvements are due to advances in hardware, networking and trading algorithms, and as transactions rate continue to fall the need to measure time in smaller units becomes more acute. "We got pulled into it," said John Hart, managing director of technology engineering at CME, of the move to microseconds measures.

At these extreme speeds, microseconds matter. A 3- or 300-microsecond improvement in one transaction, multiplied across systems that are processing millions of transactions in an hour, will add up.

"It's all at the microsecond level right now," said Steve Rubinow, the CIO of NYSE Euronext, which operates the New York Stock Exchange. "The core trading stuff has to be in the hundredths of microseconds."

The increasing focus on finer measurement levels may have broad implications for businesses outside of financial services, especially as companies turn to software-as-a-service (SaaS) providers.

In the trading world, speed measurements are taken at both ends of the deal. Microsecond measurement data helps the exchanges improve systems at various points that a transaction transverses, but the customers are measuring transaction rates and making notes.

A trader who loses money may blame IT for it for that loss, and defending against that accusation will require measurement data, said Bernie Davidovics, the chief technology officer of SeaNet Technologies. His US-based company makes a hardware appliance that can use either Global Positioning System or cellular network time data to measure transactions in a network. "He who has the data wins," Davidovics said.

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