Latency in the Financial Sector


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If there's one thing that we've been trying to impress, other than our abiding love for D&D, it is the idea that while a large amount of throughput is good, low latency should not be ignored. We've talked about how the idea of "chatty apps" that make lots of calls to the server for data can run slowly on a high-latency connection even when there is sufficient throughput.

But there are other instances where low latency is important as well. The biggest one by far is the financial sector.

A little more than a year ago, the New York Stock Exchange had a little glitch that caused a few seconds of non-responsive applications. The end result was that the NYSE had 3.3% loss in market value for that trading day - from a delay of mere seconds.

But even a delay of mere milliseconds can ruin a potential stock sale.

According to InformationWeek, electronic trading makes up 60 to 70 percent of the daily volume of the NYSE. Much like Olympic relay racers, a hundredth of a second is a quantifiable measure in the stock market. Trades are often queued by computer when some external factor applies - say that two brokers have both automatically set their computers to sell a stock called STOK to sell if it reaches $3.50 a share. A buyer comes along and offers to buy STOK at $3.50 a share. When the trade goes through, it's going to buy the shares from the broker - or more accurately, the broker's computer - that responded first.

But nearly all of the human elements have been taken out of the equation. Without those, the only differences between first place and second are a matter of network round trip time.

"A 1-millisecond advantage in trading applications can be worth $100 million a year to a major brokerage firm, by one estimate."

So, you can see why network performance isn't just about throughput. In the meantime, for your own network, you can check out our network latency calculator to find out what speeds you should theoretically be getting, and start working towards those speeds.




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