October 29, 2008
By Jason Deign
What is a second worth? Possibly not too much to you or me. But if your business has anything to do with trading on the world's major financial markets, where values can soar or plummet in the blink of an eye, then every second counts. And this poses a bit of a problem for IT managers.
In the era of electronic exchanges, tiny spikes and bottlenecks in network traffic can create delays which compromise the split-second accuracy needed for effective trading. Tracking down these problems has been beyond the reach of any technology-until now, thanks to Cisco Systems, Inc.
While traditional network monitoring systems can only analyze traffic behavior over a minimum of five minutes or so on average, the Cisco Bandwidth Quality Manager (BQM), part of the Cisco Network Application Performance Analysis (NAPA) Solution, can get down to millisecond level.
This means IT managers in stock exchanges and trading houses can now see what is happening to traffic on their network almost on a per-packet basis. Cisco BQM's diagnostics are not limited to watching network behavior, either; it can also provide information on why the delays happen.
"In a highly competitive landscape where time equals money, even the slightest delay on the network can make the difference for our customers between making a trade or not"
This is important because network latencies are not always just a matter of bandwidth. With an increasing number of applications traveling over the network, the Quality-of-Service (QoS) policies that govern how traffic is prioritized can also be critical.
"Cisco BQM can find out if the problem is with QoS or bandwidth," says Dave Wetzel, the senior solution marketing manager for Cisco's Network Management Technology Group. "It allows you to run different scenarios to track down problems.
"This means the exchange does not always have to increase its bandwidth to solve a problem; if you change your QoS settings that might fix the problem instead."
The benefit of this approach is clear. Adding bandwidth to a network can be costly and take time. So if a latency problem can be solved by just changing the QoS settings, the business can save money and sort out the problem more quickly.
Cisco BQM started shipping in 2006 and has since been adopted by some of the biggest names in trading, including Deutsche Börse.
Customers have bought into Cisco BQM after an increasing number of trades began to be made automatically, through algorithmic trading processes.
With these trades, any small delays in information transmission over the network can result in unequal trading opportunities for an exchange's clients, which might then be able to claim compensation under their service level agreements.
To get around this, the exchange can use Cisco BQMs to help monitor the market data feed and trading information sent to each of its customers, recording service quality violations to packet-level granularity.
In addition, Cisco BQM allows financial trading businesses to identify areas of concern in their network's performance before launching new applications, in order to see whether bandwidth upgrades might be needed.
Deutsche Börse, the largest exchange organization worldwide, deployed BQM to ensure the success of its Eurex market data service, which marked a significant growth in order and quote volumes and required a low-latency network that would permit swift data dissemination.
Being able to disseminate Eurex market data was seen as a crucial service that would significantly enhance Deutsche Börse's support for algorithmic trading and BQM provided the required visibility into the network by monitoring all traffic with an accuracy of 200 microseconds.
With BQM technology, Deutsche Börse is now able to perform an end-to-end latency analysis from its data centers in Frankfurt to their main access points across the globe.
"In a highly competitive landscape where time equals money, even the slightest delay on the network can make the difference for our customers between making a trade or not," says Christian Leis, head of Networks at Deutsche Börse.
But while Cisco BQM allows organizations such as Deutsche Börse to ensure their customers get network performances well within service level agreement parameters, these same customers are also using the technology for their own purposes.
Large investment banks are keen use Cisco BQM to monitor the performance of their trading networks and uncover the source of service problems.
Given the global nature of banking operations, such deployments could precipitate further use of Cisco BQM in other exchanges, as these find themselves striving to maintain the same level of service delivery as their customers.
So if time is money, milliseconds could soon be the new currency of financial trading.
- Cisco BQM is part of the Cisco NAPA solution, which uses the intelligence in Cisco networks to provide a broad view of network and application performance, analyzing network data and providing information administrators can act on. To learn more, see www.cisco.com/go/napas.
Jason Deign is a freelance journalist located in Barcelona, Spain.