Cisco Innovation Provides Competitive Advantage to High-Performance Trading

September 19, 2012 - 1 Comment

For the last decade I have been fortunate to work with leading buy-side, sell-side and execution venues from each major money center around the world.  This has been especially rewarding as financial markets have become so dependent on well-designed technology architecture in support of the exponentially growing automated trading business.

As competition grows more intense with firms fighting to capture order flow and optimize liquidity, I have discovered a common set of business imperatives that resonate with most players in the space, including:

  • An ongoing requirement for ‘Being FASTER than the Competition’.
  • Increasing Order Flow and Liquidity to help grow revenues.
  • Ability to have greater risk management insight in the trading lifecycle due to Regulatory requirements such as 15c3-5.
  • Fast Market Data Delivery and Distribution to help Accelerate Price Discovery for participant firm and exchanges.
  • Lastly, capturing key opportunities during Volatility is vital to the business.

Financial Services is an important vertical for Cisco and we have been focusing our R&D investments to optimize the value and benefit we deliver to financial markets.  This has resulted in the development of our High Performance Trading Fabric, a comprehensive architecture designed to optimize global electronic trading by addressing computing, routing, switching, optical, and trade flow intelligence in an integrated fashion that supports the multi-participant electronics trading lifecycle.

Our latest innovation results from the direct input my colleagues and I have received from our financial markets customers.  This week we are announcing Cisco’s Algo Boost technology, integrated into our new Nexus 3548 switch platform.  Algo Boost provides unprecedented performance, visibility and control for greater business agility and intelligence to allow firms to capture alpha across their trading operations.

I wanted to share a few benefit examples that are very relevant to the financial markets firms that I work with on a daily basis.

Firms co-located at the exchange or a proximity hosting provider will experience lightning fast access to market data and faster order execution through Smart Order Routing systems.  Your trading strategies will be highly synchronized leveraging Precision Time Protocol at nanosecond levels.  Lastly, you can leverage embedded analytics within the trading fabric to proactively monitor congestion points that could be rising and may negatively impact application performance.

Firms offering DMA and Client Access services will have greater opportunity to attract order flow from clients with faster Order Execution times, and accelerated order flow through Risk Management systems, Order Management Systems, Crossing Engines, etc.  With built in line-rate SPAN filtering capabilities, a firm can now understand why gapping, slippage and slow order situations occur during a trading day. This information can then be correlated with analytics tools to troubleshoot and also make smarter trading decisions.

We do understand that in delivering Client Access connectivity, a firm may want to hide its own IP address space for security reasons. With this in mind, we designed the Nexus 3548 platform to deliver line-rate NAT performance with zero penalty in latency.

Since access to Order Flow is very important, we want to ensure there are no bottlenecks in the trading chain. This can be accomplished by using our Active Buffer Monitoring capabilities, in conjunction with Python scripting, to proactively signal monitoring systems and applications that congestion is rising in certain areas of the trading environment.

Handling Microbursts or short-lived congestion, which have become very common in high speed trading environments, can make or break a trade.  Static congestion snapshots don’t allow for proactive adjustment of trading strategies to capture opportunities.  Today, with Cisco’s introduction of Algo Boost’s active buffer monitoring feature, we provide comprehensive congestion analytics identifying microburst patterns within nanoseconds range.  This enables firms to dynamically modify trading strategies on an ongoing basis to maximize the ability to capture opportunities, as volatility and fluctuations increase in the market.

Exchanges and other venues will also benefit from many of the Algo Boost capabilities already mentioned. This includes accelerating Market Data Distribution, quickly processing orders through the Matching Engines with Best Execution, and being able to handle bursty traffic effectively. Precision Time Protocol can be leveraged by exchanges to provide Timing-as-a-Service to generate a new source of revenue.

The next few years will be even more exciting as we expand to enable a truly globally connected marketplace that integrates, high performance (e.g., Ultra Low Latency) with handling of massive amounts of data for business intelligence (e.g., Big Data) with leveraged and shared infrastructure (e.g., Cloud).

The advancements that Cisco is announcing today are an important component of this ‘big picture’ enabling our customers to address challenges to create competitive advantage today … while building an infrastructure to support new business opportunities tomorrow.

You can learn more about the Nexus 3548 and Algo Boost from my colleague Berna Devrim and check out Cisco’s Algo Boost Infographic.

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  1. Sounds impressive, also liked the infographic. Is there an actual comparative time metric example?