WHITE PAPER. Minimizing Latency in Global Online Trading: Address the Middle Mile

Transcription

1 WHITE PAPER Minimizing Latency in Global Online Trading: Address the Middle Mile

2 TABLE OF CONTENTS Introduction: The Drive to Lower Latency... 3 Sources of Internet Latency... 4 The Solution: On Demand Network Acceleration Services... 5 How DNA Works: Leveraging a Vast Network and Superior Technology... 6 DNA in Action: Saxo Bank Gains Millions of Dollars in Emerging Market Revenue... 7 Conclusion: Achieving Global Performance Gains while Saving IT Budget... 7 Features of CDNetworks DNA Service... 9 About CDNetworks... 9

3 Introduction: The Drive to Lower Latency Over the last few years, large and small trading firms and their clients have spent billions of dollars improving their trading infrastructures to get as close as possible to zero latency trading. The performance gains for high frequency traders (HFTs) have been drastic in Foreign Exchange markets and traditional stock exchanges. In fact, Thomson Reuters recently found that performance gains have been so impressive that the fastest five percent of trading firms now modify their trading infrastructure and network connectivity simply to improve performance by sub 100 microseconds, even nanoseconds. 1 The performance frenzy has now spread to the futures markets. According to a new study of futures markets by the strategic advisory and research firm Tabb Group, buy side traders are now leveraging Direct Market Access and algorithmic trading channels for the majority of trading, as much as 87 percent. 2 The reason for the race to zero latency is clear very real increases in trading firm revenue. Since 2008, studies have demonstrated that performance gains measured in milliseconds can improve a financial trading firm s revenue by upwards of $100 million per year. The consequence of not having close to zero latency is severe. Microseconds can make a huge difference in values; seconds can mean dropped trades. Reduced values and dropped trades result in lost revenue. The largest players are taking action. For example, NASDAQ OMX Group, Inc. (NASDAQ) announced Express Connect in May Express Connect is a low latency, point to point network solution offering connectivity from the NASDAQ OMX Data Center in the U.S. to major financial trading and co location venues in New York, New Jersey, Chicago and Canada. 3 The situation has also grown increasingly complex for financial firms that seek to serve new and existing client bases in emerging markets around the world. As these firms compete for market share in Asia, Latin America, and other regions, their trading platforms must have the shortest amount of latency possible across distant networks, which they do not control. This places an extreme burden on IT leaders at these firms. 1 Kelly, David (2011). Balancing Latency vs. Cost, Thomson Reuters, April 11, Accessed online August 2, 2012 from the following source: latency vs cost/. 2 Tabb Group (2012). Buy Side Demands Increase in Futures Market, Tabb Group, March 1, Accessed online August 2, 2012 from the following source: 3 NASDAQ (2012). NASDAQ OMX Data Center Launches Express Connect for Co Location Clients, NASDAQ OMX Group, Inc. May 17, Accessed online August 2, 2012 from the following source: omx data center launches express connect colocation clients. CDNetworks 3

4 They must find ways to minimize latency over the middle mile of the public Internet to provide robust, high speed trading capabilities to HFTs around the world. Sources of Internet Latency Web based and mobile trading platforms depend heavily on the networks that deliver them to provide a solid end user experience in remote regions. Along the way, points of latency add up to degrade application performance. Three major factors inherent in the public Internet cause latency on trading application performance. First, latency increases during each of the multiple round trips required to complete application functionality. In the US, cross coast can take 80ms and applications in London will see 140ms to San Francisco and nearly 300ms to Hong Kong. It is even worse for mobile, where users in the US connecting via 2G/3G networks can expect round trip times of approximately 200 milliseconds (and 2% packet loss) when using applications outside of a firm s LAN. The graph illustrates the transmission of a 20 Kb object with no caching. Second, many financial 6 trading applications are DISTANCE RELATED LATENCY 5 based on TCP, which adds latency to application 4 CDNetworks performance. To achieve Public Internet 3 application reliability, the original TCP designers sacrificed speed. There have been improvements over the years to the protocol s implementation, but it still suffers from significant Data is represented in seconds. slowdowns as distance between sender and receiver increase. To overcome this, several optimizations can be incorporated, either singularly or combined, including window size scaling, delayed acknowledgements, Nagle algorithm, selective acknowledgements, limited and fast retransmits, and many others. The ultimate goal is to fill the pipe and send/receive data over sometimes unreliable connections the fastest way possible. Third, many end users access financial trading applications from mobile devices, hardwired branch offices, and even home offices all with consumer grade connec vity. Quite often, connections for these users occur at the edge of network coverage zones. This can add more than one full second of latency. CDNetworks 4

5 As a result of these three factors, financial trading applications that normally run extremely fast on LANs, or even on WANs in a firm s home country, suffer severe performance degradation when traversing the public Internet to globally dispersed clients. The Solution: On Demand Network Acceleration Services *Figures are derived from the graph on page 4. They signify the transmission of a 20 Kb object with no caching. On demand network acceleration services extend a financial firm s existing enterprise data center or WAN to geographically dispersed regions and end users. Such services accelerate content moving from an organization's internal LAN or WAN for site to site and site to user connections when applications and content traverse the public internet on the way to their final destination. Delivered as a managed service by leading next generation content delivery networks (CDNs), on demand network acceleration enables firms to turn services on without incurring additional CAPEX. As the only global CDN provider with people and operations located within mainland China, CDNetworks also brings on demand network acceleration services to all of Asia Pacific and Russia, both critical markets for HFTs. The on demand service from CDNetworks, called DNA (Dynamic Network Acceleration), enables extremely fast transmission of dynamic trading application traffic over the public internet. Moreover, CDNetworks in country expertise and points of presence within China and the world s CDNetworks has helped us achieve our goal of successfully entering emerging marketing with our flagship platform applications. ~Ashley Latham, SVP Trading Products, Saxo Bank CDNetworks 5

6 critical emerging market regions, help trading platforms minimize latency for an everexpanding customer base. How DNA Works: Leveraging a Vast Network and Superior Technology DNA takes advantage of the CDNetworks global network of PoPs (Points of Presence) to channel enterprise application traffic across a highly reliable, persistent, and low latency connection. Acting as an intelligent overlay to the inefficient public internet, DNA focuses on optimizing the middle mile traffic by reducing the number of round trips that data packets must make. DNA does this through an array of network optimization techniques similar to those that CDNetworks has utilized for more than a decade of speeding website content and applications to end users around the world. Example of real customer data before (blue) and with CDNetworks (yellow) Applying the DNA service to enterprise application delivery dramatically reduces network latency and provides significantly improved performance for financial applications that can only be accessed by SSL VPN, thick client, HTTPS, or other similarly secure methods. DNA also ensures high availability and optimal routing through its use of well honed global load balancing techniques. As remote and mobile users attempt to access trading applications, DNA routes each individual user s requests to the closest DNA PoP. This method for ensuring fast application access also accommodates failover scenarios for any network element in the path. Maintaining Data Security CDNetworks developed DNA for one main purpose to overcome the inherent inefficiencies of the internet while adhering to all the standards which govern it. As it achieves this, DNA also ensures total security by not terminating SSL or possessing the certificate. From a CIO s perspective, DNA provides dual benefits of superior application performance to remote users and the ability to retain full secure control of applications at all times. CDNetworks 6

7 Since DNA operates as a managed service, there is no need for any additional application or site configuration by IT personnel. Similarly, IT has no need to deploy hardware or to perform application specific modifications. Even adding new users to the system occurs seamlessly, as DNA delivers full application functionality to users without the use of a client or software on their machines. In this way, DNA eliminates the drawbacks associated with hardware based solutions: initial cost; admin overhead; additional expertise; deployment time; and expandability/scalability. DNA in Action: Saxo Bank Gains Millions of Dollars in Emerging Market Revenue Saxo Bank is a leading international investment bank that specializes in online global trading and investment. In addition to direct services provided to consumers and businesses, Saxo Bank developed a white label solution called SaxoTrader that is used by many global financial institutions. SaxoTrader enables investors to trade Forex, CFDs, ETFs, Stocks, Futures and (Foreign Exchange) FX Forwards and Options from one, fully integrated online platform. The platform comes in several forms a Web based application, a mobile application for Apple ios and Google Android, and a desktop application for Microsoft Windows. Saxo Bank was experiencing significant institutional demand in China for its SaxoTrader platform. While this was great news for the firm s expansion plans in Asia, the platform suffered performance degradation when serving trading applications between its Denmark based datacenter and the China market. To address application performance issues in Asia, Saxo Bank investigated local managed hosting services but found them to be either cost prohibitive or too country specific. By contrast, Saxo Bank performed extensive testing of SaxoTrader Web based and Clientbased applications running on CDNetworks DNA service. DNA performed extremely fast without the need for costly datacenter build out, said Ashley Latham, SVP Trading Products at Saxo Bank. DNA enables us to pursue multiple world regions in a fast and flexible manner. Saxo Bank needed less than two weeks to launch the SaxoTrader platform in China. With DNA virtually eliminating latency, broken trades became a thing of the past, saving Saxo Bank millions of dollars per day from lost trading revenue. CDNetworks 7

8 Conclusion: Achieving Global Performance Gains While Saving IT Budget As financial trading firms expand geographically to strategically grow their customer base, they need to maximize performance of their trading application for HFTs. Doing so is critical to business success. Yet, the growing number of users accessing trading applications from dispersed locations and a range of device types forces IT leaders to find the most flexible performance solutions possible. In addition, As a cloud service, DNA allows companies such as Saxo Bank to easily improve service globally with no additional CAPEX or time. CDNetworks Dynamic Network Acceleration provides enterprises with an ultimately flexible and cost efficient method for taking on the middle mile induced application performance challenge. Delivered as a managed service, DNA turns every user location and device, no matter how remote, into a high throughput application access point. Because DNA leverages the global service delivery infrastructure of CDNetworks, CIOs can quickly and seamlessly adjust financial application delivery strategies as business needs evolve. CDNetworks 8

9 CDNetworks Global Offices US 441 W. Trimble Road San Jose, CA Features of CDNetworks DNA Service Feature Description Benefit Optimally tuned transport layer Standards compliant transport protocol that leverages the latest TCP advances Improves Middle mile performance EMEA 16 St Martins Le Grand London, EC1A 4EN Enterprise application support Optimal TCP/IP layer that can support any application running on top of it Enables superior performance of both browser based and nonbrowser applications, such as VPN clients running over a distributed enterprise infrastructure 8 Rue de L Isly Paris, Korea Handong Bldg. 2F,828 7 Intelligent middle mile traffic management Proprietary load balancing infrastructure, based on sophisticated algorithms, that manages traffic routing and distribution within the middle mile Optimizes application response times while accounting for failover scenarios Yeoksam Dong, Gangnam Gu Seoul Network loss protection Networking techniques which minimize the impact of packet loss and traffic congestion Reduces network inefficiency and improves data transmission quality Japan Nittochi Nishi shinjuku Building 8th Floor, , Nishishinjuku, Shinjuku ku, Tokyo Transparent round trip time reduction TCP IP techniques to reduce lag time during the 'handshake' process occurring between proxies. Eliminates the need for excessive round trips across network elements caused by the protocol overhead in TCP/IP China Room No.A 1502, Keijidalou, 900 Yi shan Road, Shanghai Enforcement of data integrity System and hardware level policies that prohibit caching of SSL certificates By not decrypting secure and sensitive data, the enterprise maintains complete control over application and content control and security info@cdnetworks.com CDNetworks. All rights reserved. About CDNetworks CDNetworks enables mission critical e business in the world s most challenging markets. CDNetworks unique position as the only multinational CDN with expertise and infrastructure in China and other emerging markets makes us a trusted technology and business advisor to companies across the highly competitive industries of software, travel, ecommerce, high tech, manufacturing, media, and gaming. Accelerating performance for more than 17,500 global websites and cloud services, CDNetworks helps businesses get closer to their end users without the limitations of hardware and private networks. Founded in 2000, CDNetworks has offices in the U.S., Korea, China, Japan, the UK, and France. For more information, please visit: CDNetworks 9