Messaging Delays A Major Worry For Traders, Brokerages

I'm fairly confident that I will receive at least a few angry e-mails from readers because of the "Speed Killed the Floor Trader" headline on our story about data latency. So to make it easier for you to reach me, you can drop me a note at [email protected].

Now that that is out of the way, let's discuss speed and processing. The computers and algorithms that already have replaced 25 percent of the floor traders on the NYSE (see "Data Latency Playing An Ever Increasing Role In Effective Trading") aren't the only things making decisions in the blink of an eye. According to a study from Carleton University in Ottawa, Web users need only 50 milliseconds to make up their minds about the quality of a Web site. Yes, we all know that first impressions are important, but who knew it only takes such a short period of time to formulate an opinion? Essentially the researchers presented users with only a brief glimpse (50 milliseconds) of Web pages and asked them to rate the visual appeal of the pages. Although the users only saw each image for about as long as a single frame of television footage, their visual appeal rankings matched the results after the users had a longer time to scrutinize the page. I know many of us have a "get to the point" or "cut to the chase" attention span nowadays, but this is getting ridiculous.

That said, I am still astonished when trading technology professionals discuss reducing data latency by 30 milliseconds or 100 milliseconds because computerized and algorithmic trading systems require such fast inputs. As more investors turn to algorithms to help improve returns, the amount of data that these speed—of—light algorithms create continues to expand exponentially — and Reg NMS isn't even completely rolled out yet.

Already, WS&T's editors are hearing reports from various brokerages that on numerous occasions in March and April, the brokerages have had to use self-help exceptions on their trading desks when dealing with certain exchanges because messaging was delayed. And it doesn't seem to be confined to a single exchange. Most brokers have stated that exchanges — large and small, new and established — have had problems at various times either processing the number of orders received or handling the various messages that are sent back and forth between market participants. Whatever the cause, traders and trading technology experts are concerned and are beginning to ask questions. Are you experiencing messaging delays from exchanges? Let us know.