Stock Exchange lacks business justification for sub-millisecond trading

The London Stock Exchange said it would wait for business justification before committing resources to introduce sub-millisecond tradingto...

The London Stock Exchange said it would wait for business justification before committing resources to introduce sub-millisecond tradingto its core trading platform.

The LSE can complete a trade from start to finish in three milliseconds on Tradelect. But it is facing competition from new multilateral trading facilities boasting trading times of as little as 200 micro seconds.

David Lester, CIO at the London Stock Exchange, said the company has already achieved sub-millisecond trading in the laboratory.

"But there are so many demands on us, such as the migration of Borsa Italiana trading to Tradelect and the integration of new products and services. When you have a budget you have to see what investments will have the biggest benefit. Reducing latency is only one of many options," said Lester.

The speed of trading, or latency as it is known, is important to large investment firms that use algorithms to generate trades. These computer generated trades react to market conditions that may only exist for split seconds.

The LSE today announced a 70% increase in revenue for the six months ended 30 September. The increase was largely the result of the takeover of Borsa Italiana, which it acquired last year for £1.63bn.

The LSE said it will complete the migration of all trading on Borsa Italiana's Affari trading system in the first half of next year. This has been a nine month project that has involved transferring 120 major clients to Tradelect.

Lester said this transfer alone will deliver 30% of the expected £10m saving expected from the integration of the Italian exchange into the London business.

The exchange has already quadrupled the average number of messages its trading platform can process to 10,000 and reduced the time taken to complete a trade from six milliseconds to three milliseconds.

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