Automated trading and interconnected markets have given Canada’s investment firms a massive digital headache in recent years – and the Canadian arm of Monroe, La.-based IT firm CenturyLink, Inc. is offering a cure.
This week the company launched IQ+ Financial, a cloud-like solution that uses CenturyLink’s 62 global data centres to connect Canadian financial services and capital market firms with more than 30 international stock exchanges, while enabling them to transmit the gigabits of data generated quickly and securely without upgrading their infrastructure.
“We figured, rather than everybody trying to build their own connectivity to these endpoints, what if we just build it once, and then allow trading firms to plug into the network?” Roji Oommen, managing director of CenturyLink’s financial services business technology solutions, tells ITBusiness.ca. “Then they can immediately connect to anything from TMX to the New York stock exchange, or the Tokyo exchange, or London, or Hong Kong, at a fraction of the cost.”
As the financial services industry has transitioned from the physical world to the digital, one often-overlooked result has been the increasing role played by algorithms over the past decade, Oommen says, with many algorithms trading against each other using logic that can produce hundreds of counter-offers in microseconds.
“When you’re trading against another trader, the volume of activity that you can generate is limited by what you can process and by how quickly you can enter it,” he says. “When it’s algorithms against algorithms, the human reaction times are taken out, and the volume of the data increases exponentially.”
The increased importance of global markets has also played a role: In the past, if financial services firms wanted to trade a single asset, they only needed to connect with a single market, Oommen says. Today, if a stock has international presence, traders might need to connect with as many as 20.
Between automated trades and international listings, equity markets in the U.S. frequently generate around 50 gigabits of data per second, he says.
“So now if you’re a trading firm you need to have multi-gigabit links to markets all over the world, and your applications are very sensitive to latency,” with delays of even a single-digit microsecond having a negative impact, Oommen says. “The volume of data has become so high that for a bank it becomes a major expense.”
Though CenturyLink has been offering a version of IQ+ Financial on an as-needed basis since 2013, this week’s release coincides with a significant upgrade to the company’s capacity and infrastructure. The service is powered by two fully functioning networks that run on separate grids, so that the system behind it is always available.
As for why the company is only introducing IQ+ Financial now, Oommen says that as markets have slowed down, the industry’s profits have begun to shrink.
“When profits are high, nobody cares what you spend, but as profits decline, the banks are under price pressure to reduce the cost of infrastructure,” he says. “So our price points are particularly compelling to these institutions today.”