Intercontinental Exchange (NYSE: ICE), an international network of exchanges and clearing houses, has inked a partnership with the UK’s National Physical Laboratory (NPL), helping improve its trading synchronization capabilities ahead of upcoming requirements with MiFID II.
As of January 2018, financial organizations will be required to achieve up to 100-microsecond level traceability of trading events. This new requirement comes amidst an uptick of high frequency trading (HFT), which necessitates a greater level of timing and precision for trading venues.
Time is Money
The collaboration will feature co-location at the NPL’s data center in Basildon. The initiative will draw on the use of NPLTime, which sends the precise time (accurate to one second every 158 million years) via fibre direct from the NPL, maintaining the UK’s atomic clock which is responsible for the maintenance of accurate time across the country. This will be instrumental in helping firms meet the new, upcoming regulations.
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Users at ICE’s data center will also receive the underpinning timing capability for traceable timestamping, latency monitoring and synchronisation, in compliance with MiFID II requirements. As such, the additional layer of precision afforded through the time service will help in aiding forensics and audits, aiming to improve the functioning of financial markets and investor protections.
ICE would be the second exchange venue to link up with NPL, following in the footsteps of TMX Atrium. UBS recently became the first lender to switch over to the new clock, viewing it as an avenue to compliance with the MiFID II RTS 25 timing traceability requirement.
According to Leon Lobo, Strategic Business Development Manager, NPL, in a statement on the integration: “In today’s markets, timing is everything. High frequency trading represents around 30% of UK trades and 50% in the US – precise timing offers competitive advantage.”
“Current systems rely on GPS which is vulnerable to jamming and other interferences and uses equipment that can be inaccurate. Timing issues have led to trading irregularities with the potential to disrupt markets.”