For NYSE Euronext clients that need to know how quickly their trades cross the finish line, the exchange will provide a latency monitoring service to help them get the checkered flag. NYSE Euronext signed a deal with market data provider Correlix to license the vendor's latency monitoring service, RaceTeam, for the exchange's clients.
The RaceTeam platform -- which already is available to the clients of a number of exchanges, including the Chicago Board Options Exchange, Nasdaq and Direct Edge -- will enable NYSE Euronext's customers to get a more detailed view of what happens to their orders, from the moment they are placed through the trading desk to when they are reflected on the exchange's books and impact the broader market.
"Imagine that you have a high-frequency trader sending an order from their environment to the market," explains Shawn Melamed, Correlix's founder and chief technology officer. "RaceTeam can basically show them, in real time, changing latency conditions and how the orders were executed. Based on that information they can optimize their trading strategy."
When a trader places an order through a particular venue, the deal goes through a gateway to the exchange before hitting the market. RaceTeam, which is a desktop platform, is designed to help traders find the quickest gateways and avoid bottlenecks that can slow down executions and ultimately eat into profits.
Meeting Customer Demand for Transparency
"NYSE needs this from an operational perspective," Melamed contends. "When a customer calls, they want to know what happened to their order. Now the exchange can look at it and explain it."
NYSE Euronext officials agree with that assessment, and say the desire to ensure best execution for the exchange's customers led to the deal with Correlix. "This facility will offer critical latency transparency to our customers," NYSE Euronext executive vice president Paul Adcock said in a statement. "As business transactions move through NYX trading applications within our data center, application latency information can be shared with the firms that initiate it."
Correlix's Melamed likens the level of real-time detail that RaceTeam provides on the speed of a transaction to the ability of Reuters or Bloomberg to give a clear view of real-time pricing information on different asset classes. Along with exchange operators and their clients, he says, the system also is likely to appeal to electronic broker-dealers, such as Lime Brokerage, and investment banks that execute on behalf of their customers.
"A lot of times brokers' customers ask them, 'Did my order actually arrive to the market? You slowed down my order,' " Melamed says. "So they need this type of picture to show how much time they added to an order and how quickly it's being represented on the market."
Under the arrangement with NYSE Euronext, RaceTeam will provide latency data for all of NYSE Euronext's U.S.-based markets, including NYSE Classic, NYSE Arca Equities, NYSE Arca Options and NYSE Amex Options. Correlix says it will be available to NYSE's customers toward the end of the first quarter, most likely at the end of March.
Looking ahead, Melamed expects rising trading volumes and increased market fragmentation to drive demand for latency monitoring services like RaceTeam in the near term. "We see it already since we're monitoring each of the markets," he says. "The more people trade, the more they need to understand their latency."
As the Senior Editor of Advanced Trading, Justin Grant plays a key role in steering the magazine's coverage of the latest issues affecting the buy-side trading community. Since joining Advanced Trading in 2010, Grant's news analysis has touched on everything from the latest ... View Full Bio