From today (1 September) investment firms using algorithmic
trading can
cut the time taken to complete trades by hosting their servers
next to the London Stock Exchange's
Tradelect trading platform.
The Exchange Hosting service, which was
announced in May, allows investment firms to put their servers
in the stock exchange's datacentre.
Messages will no longer have to travel over communications
networks to get to the stock exchange. It takes about one
millisecond for every 200km travelled on fibre.
"We are targeting this at the top 10 of our clients and major
hedge funds that trade using algorithms where a micro-second can
make a lot of difference," said Wendy Morgan, head of real-time
data at the London Stock Exchange.
Servers that generate the trading algorithms will be connected
directly to the Tradelect trading platform. The quicker a trade can
be complete the more attractive it is to investors because they are
more likely to get the price they want.
Next month, the London Stock Exchange will cut the time taken to
complete a trade on Tradelect from six milliseconds to three
milliseconds as the company completes an upgrade of Tradelect.
The exchange will initially roll out enough cabinets in its
datacentre to meet current demand, and this will be followed by a
further release of cabinets in February 2009. There will be
additional services such as helping clients build servers and
install applications, and dedicated communications lines to improve
traffic flow.
The London Stock Exchange has also cut the fees it charges
investment companies for trading. This is a way of increasing the
exchange's competitiveness amid increased competition and
attracting the companies that do high-volume algorithmic
trading.
Clara Furse, chief executive at the London Stock Exchange, said,
"The new shape of this tariff structure will capture the important
growth arising from the major shift towards statistical arbitrage
and algorithmic trading in UK equity markets."
Since the introduction of the
Markets in Financial Instruments Directive (MiFID) last
November, which liberalised the share trading sector by removing a
rule that said deals had to be done on local exchanges, new players
have arrived boasting high speeds.
Turquoise is one example. The company was set up by investment
banks to take on the London Stock Exchange and other traditional
European exchanges.