Measuring message latency, especially for the data volumes and latency thresholds expected by Wall Street is tricky business these days, as we’ve
Even trickier is finding clarity in the midst of confusing and too many times inaccurate media coverage on the topic as shown in a recent article, from the Securities Industry News. I’m specifically referring to a low-latency monitoring solution vendor, who states that today’s algo trading engines require end-to-end network latencies of “less than 5 microseconds with no packet loss“.
In 2008, a colocated trading engine, which minimizes propagation delay, can expect end-to-end latency on the order of a couple of milliseconds at best. End-to-end, in this context, typically refers to time an algo issues a buy/sell order to the the time a receiving system acknowledges and executes that order.
Can the latency between these two point really be 5 microseconds? Highly unlikely. There are many reasons for this, which will be covered over time. For now i’ll mention that off-the-shelf clock synchronization solutions, a prerequisite to measuring message latency across system boundaries, just can’t support an accuracy of 5 microseconds.