Alex Walker
Alex Walker

Trading & Technology Clinic

In this the first of a new series of regular articles that we will be publishing in e-Forex, Alex Walker, Executive Vice President and Managing Director of Transaction Network Services’ Financial Services Division, answers some of your questions on various hosting and network connectivity issues.

The Swiss SNB debacle a few years ago was unexpected and had a huge impact across the FX market. In what ways can the flexibility of managed network services help to protect trading firms like ours from future “black swan” and disruptive events?

Events, such as this, create market volatility which drives pricing and market data demand significantly and causes a surge in trading activity. Our responsibility as a service provider is to ensure our clients have the available bandwidth to support such volatile events by helping exceed and burst beyond their subscribed bandwidth without packet loss, disruption or delay to trading activity. It’s essential that this is available as a required service, without manual intervention. TNS enables bandwidth burst above the contracted bandwidth to accommodate for such volatile market conditions without any additional charge. 

We are an FX trading firm looking to access a variety of emerging markets. What benefits would we get by outsourcing all of our overseas connectivity needs to a specialist provider?

With an extensive global network comprising of 125 PoP’s and operations across 60 countries, we have offices in many emerging markets and employ local personnel with appropriate language skills, local market knowledge and established contacts within the industry. Connected firms are able to rapidly establish trading connections, within days typically, to other connected firms, venues and providers. This is scalable and further connections can be provided for a very cost efficient incremental charge as and when required. Not only that but the service is fully managed which eliminates the requirement to acquire resources or commit capital expenditure.

“The Secure Trading Hub was launched last year”
“The Secure Trading Hub was launched last year”

How much customisation of trading networks is achievable to fit the specific needs of firms such as ours who are looking for points of entry into data centers, as well as low latency connectivity to exchanges and new sources of FX liquidity and Market Data?

Since we launched our financial trading network over 20 years ago, we have grown, adapted and evolved to meet the demanding requirements of FX trading firms. Today our services include community network, managed co-location and hosting, and FIX order routing services, all of which address the subtle varying needs of our customers. Our low latency network connects key FX venues globally and our data center cross-connect connectivity solutions allow our customers to trade within an FX liquidity venue or between such venues thereby enabling a global B2B trading marketplace. There is a financial barrier for some smaller firms or new entrants. Our Managed Hosting, Co-Location and Connectivity service can significantly lower this barrier and provide a very cost effective turnkey solution.

We are expanding our trading coverage beyond FX to include new asset classes, but are concerned about the burden associated with setting up and managing multiple FIX connections for our order routing. What solutions can assist us?

Our customers came to us with this exact problem and we addressed and responded by creating and launching our own Secure Trading Hub last year. This service uses and complements TNS’ Secure Trading Extranet as the underlying service, but the connectivity needs are managed and addressed at the FIX application layer by routing orders between a buy and sell side based on the FIX tags. This service is agnostic of the asset class traded and connectivity between counter parties using the hub can be turned up within 24hrs. Also to meet and fulfill some compliance and risk requirements, as well as data privacy needs, TNS’ encryption service provides network layer encryption as an optional service.

We have heard about so called “intelligent services” that some providers of trading networks now offer. What are these and how can they assist FX firms to trade and collaborate more effectively?

Intelligent service to us means building networks to intelligently adapt in response to changing market conditions. When the markets are volatile there is a significant surge in activity pushing the bandwidth requirements to high levels, micro-burst data spikes occur and jitter can be caused. With 20 years of experience operating our secure trading network, we have built and maintained our network to accommodate these demands and provide our customers with consistently high service performance. 

“Ensuring that connectivity to the cloud is reliable, highly available and above all secure, is becoming a big concern for firms”
“Ensuring that connectivity to the cloud is reliable, highly available and above all secure, is becoming a big concern for firms”

We are a very high frequency FX trading firm. How does the value proposition of taking a fully managed approach for both our connectivity and hosting needs compare with organising everything ourselves in terms of the key upsides and downsides?

A do it yourself approach suits organizations who have technical resources available to manage their network and hosting operations on a 24x7 basis. This is especially important for traders within the FX markets who trade internationally six days a week. At TNS we strongly believe that total cost of ownership is significantly reduced by outsourcing. This allows the FX firm to focus on its core business and partner with a specialist to build, manage and operate their connectivity, managed hosting and co-location services cost efficiently. Firms benefit with low start-up costs, quick service deployment, rapid speed to market, elimination of cross border challenges and leveraging constant technology upgrades and development. However, all of these benefits can only be achieved by being diligent and choosing the right service provider, otherwise the risk to business and reputation can be significant. 

There are now a diverse range of Financial Cloud ecosystems catering to FX trading firms. If we decide to use the Cloud how confident can we be that connectivity to our applications in it will be both reliable and secure?

Whether it’s providing service to application providers in one or more of the key FX liquidity venues globally or to an application hosted by a cloud services provider, we are highly confident that connectivity provided over our network is both reliable and secure. We provide the highest availability possible across our core network.  Many service providers providing cloud based services in the key liquidity centres in London, Frankfurt, Tokyo and New York, to mention a few, are connected to TNS in the same data centers. Firms that want to connect to an FX trading venue, provider or to a number of FX trading counterparties in those centers can use TNS’ Managed Cross Connect service in that center safe in the knowledge that TNS provides fully resilient FX center to FX center low latency connections at capacities to handle the most volatile markets. Increasingly we see firms adopting cloud services from the very large cloud service providers such as AWS. There is a lot of advantage to be achieved by leveraging the flexibility and cost efficiency of cloud service providers. Ensuring that connectivity to the cloud is reliable, highly available and above all secure, is becoming a big concern for firms as they look to leverage their cloud investment. We’ve developed our Secure Cloud Connect service, for firms looking to place applications in the cloud. The Secure Cloud Connect service includes value added features such as the ability to fail over between cloud sites, deployment of additional security using network encryption on demand and elimination of network bottlenecks by provisioning large capacity to the cloud sites.  Choosing an experienced service provider with financial trading environment knowledge and experience in operating large network environments is key to receiving reliable service.

Connectivity and trading infrastructure service provision is an increasingly competitive market. What factors should influence the choices we make on which providers would be most suitable for us to partner with?

The most important factor to consider is whether the service provider understands your business needs. It is critical that the service provider has experience operating a large network that serves and understands the critical needs of the financial community. In addition, it is important that the service provider has established operations with global scale and local knowledge is essential. A single vendor with a varying range of complimentary service also helps to achieve operational efficiencies.