Connectivity is such a refined science these days that technology firms are able to connect large scale solutions provided by enterprise professional services companies to infrastructure with relative ease. What is more, there is a definite trend currently emerging in which large institutional financial software houses are rushing to connect to trading venues.
Enterprise financial software conglomerate SS&C is the latest to connect to TMX Atrium’s Toronto location, enabling SS&C automatic access to community members and also benefit from access to the venues and participants already ‘on-net’ with TMX Atrium.
This is a further indication that North America is still very much the territory of choice for availability with its highly advanced infrastructure, and SS&C indicated to Forex Magnates that one of the major driving factors which led to this connection is to expand SS&C’s North American reach via TMX Atrium’s access options which appear to be a continual default choice for firms looking to expand their depth of reach.
Clouds A Clear Way Ahead?
The rate of network expansion in North America is rapid as the majority of such connectivity is cloud hosted, and therefore free of logistical and hardware considerations as was the case with fixed infrastructure legacy systems.
As an example, just yesterday, CFN Services went live with TradingHUB by connecting to its network with a single connection to multiple liquidity venues, and TMX Atrium’s upgrade of Hotspot FX’s connectivity to accommodate increasing volumes the same day, a dynamic of expansion further bolstered by last week’s events in which two large software giants purchased CEP firms.
Cloud is a growing trend among technology companies in the financial services community, and in this instance TMX Atrium is providing access to SS&C to connect with locations across 11 countries through 25 points of presence which is intended to enable participants to utilize the SS&C services.
Therefore for this application, SS&C’s initial TMX Atrium connectivity point in Toronto allows SS&C to instantly benefit from access to TMX Atrium’s community across a wide range of market types.
Large scale connectivity firms are creating a highly competitive environment in North America these days, and on this basis Forex Magnates approached both SS&C and TMX Atrium to ascertain how this extra scope could help TMX Atrium develop, and how the operational environment of the TMX / SS&C collaboration can stay ahead of such fast evolving competitors.
The response from TMX Atrium was that new markets for SS&C are the clients that can choose to access SS&C who previously did not have access to SS&C but are “on net” in the TMX Atrium community, however a conclusive answer surrounding methods of keeping ahead of ever increasing competition was not proffered.
It was, however confirmed to Forex Magnates that SS&C is looking at expanding presence into Europe, TMX Atrium is already in Europe and has a European client base. Thus TMX Atrium and SS&C can gain a synergy from such a partnership when looking at European presence.
Anglo-American Connectivity Race
An interesting move, as London’s infrastructure is improving dramatically, as is the competition, with new database centers such as the Volta facility in the City of London set to go live this year.
The 45,000 square foot center has already connected to eight carriers and all the major trading venues, thus modernizing London’s comparatively archaic networks as until now, the City has placed almost sole reliance on Equinix’s LD4 facility in Slough, some 40km (25 miles) away.
Aside from connectivity to large datacenters, new entries into Europe will be faced with competition from companies such as DealHub, a British provider of connectivity which is currently involved in FX connectivity for institutional banking sector with clients such as Goldman Sachs and JP Morgan, but intends to expand into the retail FX sector.
On the subject of competition from overseas, Mark Briant-Evans, Head of Marketing at DealHub explained at this year’s Forex Magnates IFXEXPO in Cyprus: “Internationally, new ECNs have been numerous during the past 12 months and on this basis it is evident that – at least in the current market – there is room for them all, as liquidity becomes more segregated, making expansion into retail FX an interesting move for DealHub.”
According to Mr Briant-Evans, simply connectivity between venues is only part of the solution toward seamless trading environments worldwide. “Fragmentation can make the FX market a difficult place in which to trade – at least from a technological perspective. A bank or broker can invest in a sophisticated pricing engine, or sourcing liquidity from multiple providers, but they’re increasingly finding that they need to distribute that liquidity via multiple venues and trading channels according to customer demand – and what they’re faced with is a real lack of standardization” concluded Mr. Briant-Evans.
According to Gordon McArthur, CEO of British low-latency VPS provider BeeksFX, there is more than one way of gaining access to good quality infrastructure which allows fast execution, and that the downside of the move toward cloud based, very large scale institutional solutions is that the client side becomes harder to manage.
Low Latency At The Client Side
Mr. McArthur explained to Forex Magnates today that “there are low latency network providers who focus on broker based solutions however very often the “last hop” of the retail trader to broker and liquidity is forgotten, we see the industry spend millions of dollars on dark liquidity pools and low latency infrastructure, however until very recently the retail trader was left to their own devices to ensure low latency trading at the client side.”
Mr. McArthur cites BeeksFX VPS raison d’etre as being a specialist trader’s solution.
Historically traders looked for a VPS to run automated strategies solely for the uptime reliability, this has now evolved considerably and we see users insist and push their brokers to have high performing low latency VPS offerings to do the last hop to their infrastructure
“Latency from the client side affects everything, and more so as the industry moves toward an agency model” Mr. McArthur detailed.
“The wrong VPS or even worse trading from home thousands of miles from the broker and liquidity can reduce tick throughput that a client recieves from a platform, it effects execution, it effects slippage and traders now have algo’s to measure all of these areas, most of all it effects volume.
“Algorithms make calculations on ticks. Poor client side connectivity can see a 30% loss of ticks to trading terminals, this means an algorithm is less active resulting in lower volume for the broker, for the larger brokers I could not imagine how much revenue is lost by ignoring this area.”
“We have seen an explosion in brokers looking for low latency VPS solutions to bundle with their offerings, it is a no cost offering in reality, the cost of the VPS is easily covered in higher volume and increased client retention.”
Mr McArthur sees value in entering strategic partnerships with individual brokers to provide low latency solutions to fit client requirements: “More than 70% of our business comes from our active broker sponsored VPS arrangements and more and more brokers running not only MT4 but Tradestation/Ctrader/Tradable whatever the platform may be now look to provide a free outsourced VPS to their clients” Mr. McArthur concluded.
On SS&C’s connection to TMX Atrium’s community, Emmanuel Carjat, Managing Director of TMX Atrium said in a corporate statement: “We’re delighted to welcome SS&C to our community of on-net members.”
Mr Carjat continued: “We are now connected to more than 30 venues across North America, Europe and into Russia, which ensures our customer base can expand their reach using the TMX Atrium infrastructure more efficiently. Our proven track record within the North American markets demonstrates our extensive knowledge of the key liquidity centers and the major players operating within the region.”
Robert Moitoso, Senior Vice President and General Manager, Financial Markets Division, SS&C Technologies, added, “Finding a partner with extensive global coverage such as TMX Atrium, ensures that we can accelerate FIXLink, SS&C’s broker neutral global FIX network, geographical expansion plans.”
“We joined TMX Atrium to take advantage of their North American reach, but immediately benefit from access to their European capabilities too. Our wide range of solutions, software and services complement the needs of TMX Atrium’s financial services participants and allows us to focus on our core competencies, confident in the knowledge that TMX Atrium will manage our network and community connectivity” concluded Mr Moitoso.