Democratizing Market Data over RF

Recently at BSO, we’ve noted a significant upsurge in interest – from both existing and
prospective clients – into how they can use our RF (radio frequency) networks for receiving
market data at the lowest possible latencies. Both for the New Jersey equities triangle
(ICE/NYSE Mahwah – NASDAQ Carteret – CBOE Secaucus) and for the Chicago derivatives
markets.

For the New Jersey Triangle, BSO has been delivering market data across RF backed up by
fast fibre for some time, which had proved a very popular service. In Chicago, due to
growing demand, particularly from firms wishing to source data from ICE and execute on
CME, we are now optimizing our existing RF networks between the ICE Cermak and CME
Aurora data centres to provide delivery of raw market data at the lowest possible latencies.

Optimizing RF networks

When you’re playing the ultra-low latency game, you always need to be optimizing, and that goes for both market participants and their vendor partners. This is why BSO is developing and expanding our RF networks by putting technology in place that not only reduces latencies and increases capacity, but also provides greater resiliency, too.

One of the key issues with RF is ensuring that there is a strong and fast failover to fibre when the RF network is unavailable. RF is very sensitive to weather conditions and other obstructions. And because those obstructions can create gaps, it is essential to have a parallel conduit, to arbitrate and make up for those gaps. As a low-latency infrastructure provider, BSO is able to leverage its low latency fibre network to complement our RF network. That means that in case of bad weather and so on, the RF network seamlessly fails over to fibre, and switches back equally seamlessly. The key point here is that clients are not losing any data due to weather conditions or other obstructions, so they can rest easy in the knowledge that most of the time they’ve got the fastest data market data over RF, but in the event that’s it’s disrupted, they’re still getting fast data over fibre.

A new landscape of RF users

Traditionally, the use of RF networks for market data and executions was only available to the top tier high frequency trading (HFT) firms. However, that situation is now changing, as a new landscape of RF users is developing.

At BSO, we see three audiences for our RF products. The first is the tier one HFTs, whose strategies are based upon arbitrage, where ultimately the lowest latency wins. BSO has the top HFTs in the world as clients, and we’ve been serving them for some time.

The second tier is an amalgam of market data vendors, algorithmic trading firms and systematic hedge funds, who generally don’t have the same level of dedicated infrastructure as the tier one HFTs. This second tier may use a mix of dedicated or shared RF bandwidth for market data, typically at 50Mbps point-to-point in the metro areas and 2-4Mbps for longer-haul routes. Often, they are consuming the market data at the lowest latencies through the higher-grade network, and sending orders and receiving executions through the lower-grade one. And although this makes them marginally slower than the tier one HFTs, it still provides a good RoI.

The third subset of players, which have only started looking at this in the last two or three years, is the wider audience of prime brokers, tier one/tier two banks, and other firms using looking to use RF for executions, such as executing brokers. Realizing that they are leaking revenue to more nimble firms who can execute faster than them, and not wishing to get squeezed on the market because they can’t execute their clients’ orders ahead of their competitors, these firms are also now starting to adopt RF networks.

BSO’s RF market data service, both for the New Jersey triangle and between ICE and CME in Chicago, is targeted at all three of those subsectors: the lowest latency market makers and HFTs; other algo trading firms that want the fastest market data but might execute over fibre; and banks and brokers using RF mainly for executions. Additionally, for those firms that don’t need their own dedicated links, BSO now offers a product called Share RF. We can also bundle other products and services into the offering, such as data centre colocation and proximity hosting, for sourcing market data and handling executions locally.

Removing the barriers

Clients inexperienced in RF, who need help when deploying these kinds of infrastructures, can be confident that BSO removes the barrier of complexities and technicalities that RF can induce in a trading environment, and makes everything seamless for them when migrating to RF from the pure Ethernet fibre that they’re more familiar with. In short, we are democratising the use of RF, by making it viable for firms who aren’t tier one HFTs.

Looking ahead, we expect to start seeing demand for RF in the crypto and digital assets space in the not-too-distant future. BSO is already well placed to service that market, with our strategic locations across the existing financial markets, our cloud gateways, and our CryptoConnect product for low latency crypto trading.

In conclusion, for any firm looking at leveraging RF for market data or trading, it is essential to work with a vendor who’s well versed in that space and who’s constantly working on improving latency and increasing capacity. A vendor such as BSO.