Computers have already taken over from the traditional scenes of jostling traders, shouting over each other on the frantic floors of international exchange offices. This development alone has increased the volume of trade by orders of magnitude due to the faster processing of orders.
Savvy investment companies are recognising that reducing network latency by nanoseconds is critical for increasing profits and competitive advantage and so it is now typical to see the major players invest heavily in low-latency infrastructure to connect their strategic data centres with major trading hubs. Yet as lower latencies become ever more achievable, participants are looking to entirely new strategies capitalising on the opportunities afforded by Machine Learning and Artificial Intelligence (AI) to get ahead.
Several forms of automated trading, including some types of algorithmic trading, are already well established, relying on processes and pre-programmed instructions to minimise cost, market impact and risk in execution of an order, rather than to enhance profits alone. Many of these models are not reliant on latency, exploiting complex mathematical formulae and market intelligence instead. But there are still many traders that follow the mantra: survival of the fastest.
Today it is no longer the trader who can scream the loudest and jump the highest who is the most successful, but rather the trading company that has the most powerful computer hardware and the ‘fastest’ network, to process and send orders more quickly than their competitors.
When it comes to maximising these processing and transmission speeds, there is nothing in the financial world that can compete with the innovation of High Frequency Trading (HFT). HFT relies on the transmission of multiple orders sent to the stock exchange at near-millisecond Round-Trip Times (RTT). As a result, ultra low latency networks and advanced computing algorithms have been developed to optimise the underlying trading architecture to cope with the stringent demands of the HFT sector.
When you demand intelligent connectivity, demand Colt.