Focus on Time and Money: The ATIS Workshop on Time Sync in Financial Markets
by Marcella Wolfe | @atisupdates | Nov. 1, 2016
ATIS: Why are network timing issues increasingly critical to trading institutions?
Kamatchi Gopalakrishnan: The European Union is currently adopting more precise timing protocols; ultimately this may drive more secure, precision time synchronization for U.S. financial transactions. These new protocols are driven initially by the European Union’s Markets in Financial Instruments Directive (MiFID II), a comprehensive set of regulations going into effect January 3, 2018. In part they require that transactions be time stamped to one microsecond of accuracy and coordinated with the Universal Time Coordinate (UTC) to within one hundred microseconds.
The U.S. is not actively developing regulations as comprehensive as MiFID II. However, they are putting forth various rules with regard to timing. Some by FINRA others, most recently by the SEC, indicating that all transactions need to be coordinated to the National Institute of Standards and Technology (NIST), which can be seen as the U.S. version of UTC, to within about a 50 millisecond accuracy. This takes effect mid-2017. I expect that date to move up a bit and also the level of accuracy to increase significantly. This essentially parallels what’s going on in Europe.
Achieving more precise timing, beyond being about meeting regulatory requirements, can help companies achieve their operational excellence goals. When you really understand the dynamics of your computing environment and the true time differences between points A and B, you generate more advanced analytics in your network systems and applications. This translates into the ability to trade more rapidly, efficiently and effectively. Some organizations are already much further ahead with the internal use of more precise timing. This may be one of the secrets as to why they trade as well as they do. That’s why companies need to be tuning into the timing discussion.
ATIS: What exactly will the Time and Money Workshop cover?
Kamatchi Gopalakrishnan: The Workshop covers the latest timing-related developments in terms of what they mean to financial institutions’ success. These include: the regulatory environment, what you have to do to improve your timing capabilities by act of law, why you’d want to do this to achieve operational excellence—namely through improving performance analytics, and how can you do this with a high degree of reliability and integrity. Speakers will include developers of the latest precision timing technologies and solutions, financial trading experts, the SEC, telecom service providers—the professionals managing time for the entire network, NIST, the "keepers of official U.S. time," the Department of Homeland Security Office of Infrastructure Protection, amongst others. The Workshop will provide a highly efficient crash course in what timing issues matters most specifically to the trading industry.
ATIS: Who should attend?
Kamatchi Gopalakrishnan: Timing engineers, network engineers, compliance experts, finance and trading software specialists, telecom experts and the developers of the latest timing technologies. Currently, most trading firms don’t have someone who owns timing as a design service. While they may have five or six network engineers, it is increasingly becoming important that they have a timing specialist that really understands this space. This person may be considered the chief timing architect, the in-house "Timing Czar," or "Lord Chronos, keeper of time." These experts own responsibility for delivering highly precise time to all of the systems in the firm. This includes figuring out what to use as an authoritative source and how to distribute it.
Firms and exchanges are now grappling with scenarios in which their timing can sometimes provide inappropriate answers. In some cases, execution reports have come back before an order has been sent. That’s a matter of the resolution ability of the current timing systems. The chief timing architect reconciles these issues. They carefully think through the workings of the firm’s data center and wide area network as to how to handle timing.
ATIS: How knowledgeable are the trading firms about the timing changes taking place and their impact?
Kamatchi Gopalakrishnan: They are slowly becoming aware. For some it is sneaking up on them.
ATIS: What do companies currently use as an authoritative timing source(s) and which protocols are used to deliver it?
NTP vs. PTP
Most companies take timing for granted. Today the Network Time Protocol (NTP) is the default used which is fairly ubiquitous across the Internet. Officially it is a "networking protocol for clock synchronization between computer systems over packet-switched, variable-latency data networks." As implemented today, NTP is reasonably accurate. However, it is nowhere near the level of precision that the regulators are looking for or what is needed for sophisticated operational analytics. This is driving the need for conversion to Precision Time Protocol (PTP), which is currently being used in Europe.
PTP was originally defined in the IEEE 1588-2008 standard. Devised as a highly precise way to share timing among precision laboratory instrumentation, it has expanded from there to encompass broader usage. Given its level of precision, it can take timing to the next level within the data center. However, adopting it means going back to your equipment providers and vendors to make sure that they can now support PTP within their equipment.
GPS and Alternatives
In the U.S. , the most conventional way to get timing today is to use a Global Positioning System (GPS) receiver, which works through the American constellation of space-based satellites in the Global Navigation Satellite System (GNSS). With space-based timing sources, the signal comes from far away. This means it can be weak and can drop out for reasons including rain, snow, fog or sunspots. There have also been cases of blocking, and jamming of GPS signals.
There are GPS alternatives. Internally, firms can provide their own high-quality and cost-effective atomic clocks to act as a GPS backup. In addition, the National Physics Laboratory (NPL) in London is providing a service with a particular carrier for delivering precision timing directly to your data center provided over fiber optic links. NIST in the U.S. is starting to do something similar.
There is also a movement to reactivate the LORAN, short for long range navigation system. This was the traditional waterways navigation system prior to the GPS. The U.S. government is looking at activating something called eLORAN as opposed to LORAN-C as a credible alternative. Not being space-based, it’s not subject to the atmospheric interference and provides a much stronger low-frequency, ground-wave, ground-penetrating signal. Because of the signal magnitude, it’s also extremely difficult to jam. It would provide a more precise timing source.
ATIS: How do the telecom application synchronization requirements differ from financial application synchronization requirements?
Kamatchi Gopalakrishnan: Telecom-based applications need either frequency synchronization or phase and frequency synchronization, and time synchronization is optional. In case of financial applications, time synchronization is a must requirement.
ATIS: What are the different timing profiles and what would be the preferred profile for financial trading network?
Kamatchi Gopalakrishnan: Timing profiles are subset of requirements derived from IEEE 1588 specification and targeted for a particular application to achieve required synchronization goals in most reliable and interoperable way possible. One of the preferred timing profiles for financial trading network is Enterprise profile based out of IETF that recommends PTP over IPv4 or IPv6 with multicast transport.
ATIS: You mentioned that better timing can deliver improved operational excellence. How so? What type of analytics are possible when trading companies take timing more seriously?
Kamatchi Gopalakrishnan: Time and Money covers what the analytics look like and why you should be collecting them. With improved timing, the data collected becomes more accurate, and this means new forms of data. Currently, because the timing data we receive is limited in its accuracy, there’s no point in investing in advanced analytics. Why bother when you get strange results like negative time or orders executing before you send them out. Improved timing helps you get quality answers that you can take to the bank and make money on.
Algo trading is using very precise timing to eliminate the speed of light restrictions between exchanges when doing arbitrage. We can make the network go faster and faster, but at some point, Einstein gets in the way. If you’re a hundred miles away you’re going to be slower than if you’re ten feet away. This company sends their orders in to execute, but they synchronize the times so they all go off at the same time, essentially erasing the effects of the distance limitations.
Telecom carriers approach timing as an incredibly precise frequency standard and phase, because among many other issues they are concerned with issues related to cell towers and handing off calls. The financial community is not concerned with these issues. They have typically approached timing as merely a matter of day/date/time. They want to see a wall clock carried out to six zeros past the decimal point. Time and Money puts the timing issue in terms that are relevant to traders.
About Time and Money: The ATIS Workshop on Time Sync in Financial Markets
ATIS gathers experts from the National Institute of Standards and Technology, the Securities and Exchange Commission, the Department of Homeland Security and many more organizations at the New York Stock Exchange this Jan 25 to discuss the latest developments precision time delivery, potential regulatory changes on the horizon, and what this all means for the financial industry’s future.