Low latency and the advancement of technology has most certainly become a point of discussion and technical development among institutional firms lately, with the race to achieve minimal latency increasing its momentum almost every day.
On the retail side, things are somewhat different, however today in an exclusive announcement by low-latency VPS provider BeeksFX, it has been confirmed that the company has entered into a strategic partnership with FxPro Financial Services in order to offer FxPro’s clients its Next Generation Virtual Private Server (VPS).
This solution will be hosted via the BeeksFX London data center and will offer a low latency solution for users of FxPro’s MetaTrader 4 and cTrader platforms.
This morning, Gordon McArthur, CEO of BeeksFX, spoke to Forex Magnates on the partnership: “FxPro has chosen us as a UK Based provider to work with due to our best in class VPS which offers higher tick throughput and faster execution than other providers. We are leading the way on VPS innovation for traders seeking ever higher performance for their automated strategies”.
“BeeksFX looks forward to an ongoing, successful relationship with FxPro and we are excited to be part of this new innovation for the FxPro clients” enthused Mr. McArthur.
Institutional Advances Overshadow Retail Infrastructure
On the institutional side, there have been some major infrastructure advances recently, whereby the entire worldwide networks are connecting via high-speed fiber optic and in some cases microwave technology to the world’s venues in order to widen the access to liquidity pools and reduce trade execution time. So critical is this becoming that large software houses have engaged in complete buyouts of big data analytics firms such last week’s acquisitions of Apama and StreamBase by two large software conglomerates.
In addition, point to point connectivity communities such as TMX Atrium is experiencing significant expansion into new areas by fostering alliances outside of North America, and new infrastructure and data centers being set in place as demonstrated by Volta’s new 45,000 square foot facility in London, which yesterday entered into a partnership with Dutch carrier-neutral connectivity firm Custom Connect.
Catering to the requirements of latency-sensitive users in the institutional sector of the indsutry, Volta’s 33,000 volt Great Sutton Street facility which goes live later this year is very close to the City’s financial district.
In preparation for such a move, Custom Connect, headquartered in Amsterdam, has recently expanded its footprint by opening up a new office in the City of London. The new partnership with Volta will enable Custom Connect to deliver their services in the heart of the City of London in a state of the art carrier neutral facility. Custom Connect’s full portfolio will become available including the possibility to connect to ultra-low latency microwave transmission services.
VPS As A Means Of Shrinking The World
Application of infrastructure technology is somewhat different on the retail side, whereby in a lot of cases traditional infrastructure is used, and therefore differences in execution speed are more evident depending on the location of the trader compared to the broker.
By utilizing a VPS close to servers used by liquidity providers and technology partners of brokers in the retail sector, latency can be substantially reduced.
Mr. McArthur is of the opinion that the large institutional FX technology providers often concentrate on supplying high-level infrastructure solutions with which to compete with other companies in that market segment, plus to give institutional FX companies the best solution they can offer, but in doing so often forget the needs of the individual trader as these solutions are aimed at large-scale organizations which execute thousands of orders per day rather than solitary retail traders.
Customizing Low Latency
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Viewing execution time from the perspective of individual traders, Mr. McArthur believes that the real value of using the VPS is that traders can individually locate themselves close to servers without having to be part of a large, institutional FX firm.
As most of the trade executions made by retail clients is carried via standard fixed-line broadband internet, the retail traders based away from their brokers are disadvantaged compared to those with access to the latest institutional connectivity systems. As well as distance from servers, there are also large regional differences in domestic internet speed, further impeding execution time. For example in North America or Europe, traders experience a significant speed differential compared with those of the Asia Pacific region due to the less advanced internet connections and distance from western brokers’ servers. This can sometimes result in a difference of between 200 to 300 milliseconds in execution times.
Evolution of the Forex VPS
When forex traders started using VPSs it was more to reduce the risk of automated strategies being interrupted by power outages or bandwidth failures on home PC’s as this was where most automated strategies were run by retail clients.
Today this has changed massively. Resiliency in power and network are taken as basic pre-requisites in retail VPS provision. Further, due to the explosion in EA trading and the move to retail HFT, clients now demand specialist optimized VPS configurations that have both low latency and are optimized to maximize tick throughput and round trip execution speed.
Mr.McArthur further explained the detail of this to Forex Magnates today: “The location of the VPS to reduce latency has become all important as has the performance of the VPS. There are so many tools to measure VPS and broker performance it is becoming a critical component in the battle to win and retain retail clients as the move to the agency model gathers pace. This is why we see almost every major broker already partnering or in the process of partnering with a specialist low latency Forex VPS provider” he said.
Direct Fiber Connections
“The race for low latency is also a client side phenomenon, agrees Mr. McArthur. “The most common question our support desk gets asked on a daily basis is to test latency between broker and VPS. Clients make decisions on which broker to open an account with based on this (obviously, amongst other factors) and also if the broker offer a “free” VPS service.”
“To get to an unbeatable position in the latency race as a VPS vendor we made a decision to have a dedicated presence in Equinix NY4 over 18 months ago and we will move into Equinix LD5 to add to our London presence over the next few months.”
“We will as far as we are aware be the only VPS provider to offer both locations. BeeksFX were the first to use direct fiber x-connects within the data center to connect traders’ VPS’s to brokers/bridge and liquidity providers. This allows sub 1 m/s latency between us and the brokers. We continue to proliferate these direct fibre connections and it is the main reason we are moving to LD5 in London as Europe’s major hosting facility for forex providers” Mr. McArthur explained.
Next Generation VPS Platform
With regard to the future of the VPS and its expansion into other areas, Mr. McArthur stated: “Within the last month or so we have released and deployed our next generation platform in both our London and NY locations. We see a large improvement on execution speeds; reduction is slippage and an increase in traded volume by retail using our new platform. It was 12 months in development and is fully tuned and optimized for forex trading.”
“As the market matures and becomes more specialist retail clients no longer want VPSs from generic web hosters as they cannot match the performance of a specialist set-up. To give a few examples of this would be difficult without releasing any operational details behind our new platform.”
“In a normal web hosting environment web applications are very “read biased” to the storage infrastructure i.e. the web site sends mostly read requests to the disks. In trading this is the exact opposite and most of the activity is write intensive so when you know that you can optimize your storage footprint to be optimized for this type of workload.”
“Also the amount of ticks received is not the same as the amount of ticks sent by say an MetaTrader 4 server. There is huge variation in this, and by as much as 30% this has an amazing effect on traded volume particularly with automated strategies. It is possible to optimize the network and the TCP/IP stack to get much higher tick throughput for traders.”
“Configuring systems for trading like the above examples would make for a poor web hosting experience so I believe as the market continues to evolve more retails clients will move to Forex VPS specialists and brokers will continue to work with VPS innovators and low latency specialists” concluded Mr. McArthur.