Big stock exchanges now battling for microseconds

New view of transaction times may help change how IT thinks about speed

By Patrick Thibodeau , Computerworld
30 July 2008

Computer systems, hardware and networking technologies have improved so much that two of the world’s largest trading exchanges say they have begun measuring transaction times in microseconds.

What is a microsecond? It’s one-thousandth of the relatively familiar millisecond — in other words, one-millionth of a second. Speed like that is too fast for us humans to visualize.

But trading systems inhabit a Terminator 2-type world, where machine battles machine. Such systems — which are, naturally, automated — compete for the best price by getting the electrons to travel through servers and networks as fast as they can. With millions of dollars, and customers, at stake, the IT managers who run these trading operations are continually finding ways to increase system performance.

In the past year, the New York Stock Exchange and CME Group, which operates the Chicago Mercantile Exchange and Chicago Board of Trade, have begun to frame their thinking in microseconds as they look at some of the processes involved in their superfast transactions.

The need for microsecond measures is an outgrowth of the steadily increasing speed of transactions, which are heading into the single-digit-millisecond range. Improvements are due to advances in hardware, networking and trading algorithms, and as transaction rate times continue to fall, the need to measure time in smaller units becomes more acute. “We got pulled into it,” said John Hart, managing director of technology engineering at CME, of the move to microsecond measures.

At these extreme speeds, microseconds matter. A 3- or 300-microsecond improvement in one transaction, multiplied across systems that are processing millions of transactions in an hour, will add up.

“It’s all at the microsecond level right now,” said Steve Rubinow, CIO of NYSE Euronext, which operates the New York Stock Exchange. “The core trading stuff has to be in the hundredths of microseconds.”

The increasing focus on finer measurement levels may have broad implications for businesses outside of financial services, especially as companies turn to software-as-a-service (SaaS) providers.

In the trading world, speed measurements are examined at both ends of the deal. Microsecond measurement data helps the exchanges improve systems at various points in a transaction, but the customers are also measuring transaction rates and making notes.

A trader who loses money may blame IT for that loss, and defending against that accusation will require measurement data, said Bernie Davidovics, chief technology officer of SeaNet Technologies Inc. His Kew Gardens, N.Y.-based company makes a hardware appliance that can use either GPS or cellular network time data to measure transactions in a network. “He who has the data wins,” Davidovics said.

SaaS and cloud-type service providers and their customers may face similar concerns over response times. For SaaS providers, these kind of precise time measures will grow in importance, said Michael Salsburg, a director of the Computer Measurement Group Inc., a not-for-profit organization in Turnerville, N.J., whose members are concerned with IT service delivery. Vendors will likely use their speed as a competitive differentiator, but customers will measure as well to ensure that service levels are met, he said.

But when it comes to speed, the technology staffs at the exchanges are constantly looking for ways to improve response times by improving interconnects, tweaking operating systems and trying out new systems and the latest processors. Hart said CME, for instance, is already piloting Hewlett-Packard Co.’s just-released first blade system in the NonStop line, which he said doubles the throughput of earlier NonStop models.

The shift to microsecond measurement is also changing expectations for vendors. Rubinow tells the story of a storage manufacturer (that he didn’t want to identify) that told him its new system delivered “sub-millisecond” response times.

Questioning the vendor about the “sub-millisecond” claim, Rubinow said, “Do you mean 900 microseconds or 100 microseconds? Because that’s a world of difference to us.” The vendor said he wasn’t certain because he hadn’t been asked that question before. Rubinow responded: “Well, get use to it, because everybody in this industry is going to ask this question.”