Precision Time for Precision Trading
Dr. Jock Percy, CEO of Perseus Telecom looks at precision trading across global market-to-market trading architecture.
Source Time Recognition
Today the main communication linkage between the US’s master government clock in Colorado with companies’ clocks and servers distributed hundreds or thousands of miles away, connect through a broadcast of GPS data. The time it takes to transmit data from the NIST UTC clock to the site of most financial markets in Chicago, New York, Boston and Washington DC is about 500 milliseconds Round Trip Delay (RTD).
GPS communications transmit time data in different protocols than telecommunications protocols used in Local Area Networks (LAN) and Wide Area Networks (WAN) such as IP Internet Protocol at Layer-3 or Ethernet at Layer-2. GPS data must be translated to a networkable time protocol such as the widely utilized NTP – Network Time Protocol NTP. Since the source of time is translated, transported, translated again, networked and then recognized by a system’s operating system, many local enterprise clocks experience unpredictable drift, jitter or delay in receiving accurate time and thus throttle expectations to account for drift.
PTP – Precision Time Protocol
In a fast paced environment where communications continue to evolve, so does the need to transmit data have to evolve and keep up with higher demands on performance and latency. PTP as defined by the IEEE1588 standard offers the highest precision of time synchronization over ethernet networking. Ethernet is now an industry standard for LAN networking and ultra low latency connectivity across an enterprise architecture.
Through the use of PTP, networks can avoid many of the software and operating system issues that additional processing undergoes with NTP. PTP works at the chip level of devices and therefore can be injected right into the processing of a system rather than have time wait in queue with other process data. The use of PTP brings oscillation, jitter and delay down substantially, helping to provide predictable and deterministic time delivery. A series of high-tech advancements in various industries, particularly within financial markets such as higher processing speeds of data, larger data bases, data collection and data transfer, have led to the need for faster time synchronization measures.
FINRA regulations have allowed for financial firms to certify it’s time against the NIST UTC timescale within one second. Today, time certification for processing OATS clearing reports must now be proved to be in sync with the NIST UTC timescale in “1 millisecond or finer increments,” according to FINRA Regulation CAT – Consolidated Audit Trail to be implemented by the end of 2013. Current market participants use various forms of time stamping with varying degrees of accuracy. The problem is that this can lead to deltas and discrepancies in the time stamps used to record and report trade events. Increasingly accurate solutions that delivery the same UTC heartbeat to all market participants will save a considerable amount of human time and effort because there will no longer be discrepancies to resolve.
As the exchanges and members adopt a more precise, consistent, legal and standardised source of time there will be fewer disagreements because of the absence of discrepancies between parties timed events.
Regulatory reporting and audit review of activities will also be made more simple because with more accurate time stamps participants are subscribing to a time stamp service that is already certified and attested to as legal time.