In order to address the balancing act of how and where to invest we have defined the Latency Framework (see Figure 1) and Instrumentation Capability Curve (Figure 2). These frameworks are used to determine the impact of volume and latency on platform stability and performance, to relate instrumentation to capability maturity and also to establish where to target platform improvements for greatest impact. For example, a key to determining the inherent capacity and performance of a system is through statistical profiling of changes in latency as volumes increase to the point at which the system becomes unstable.
Latency measurement
Since latency occurs at every node across the entire order flow (see Figure 3), instrumentation, and the ability to accurately measure and monitor latency, is important to understand platform behaviour. The evolution of technology has reduced ‘best in class’ latency within nodes to micro-seconds; consequently, the ability to dissect the latency of complex trading platforms (Tier 2 in eTrading Platform Maturity) non-intrusively is essential so as not to degrade performance. It often requires the procurement of tools and the ability to assign latency a ‘monetary value’ in order to secure the required funding.
Understanding the latency at each point in the trade flow allows intelligent Return On Investment decisions to be made. The latency framework (Figure 1) is used to categorise the business and IT latency requirements against potential solutions to ensure a cost-effective approach using the best-fit technology and process.
For example, when reviewing the statistical profile of message latency through an application component (see Figure 4) it is imperative to look at a standard frequency distribution instead of taking an average of latency across the day. Frequency distribution will demonstrate both the ‘jitter’ and the ‘tail’ of the message latency.
Latency: Why Care?
