Web services and messaging — better together
In the late 70s, Reece’s Peanut Butter Cups struck advertising gold with a memorable campaign in which people accidentally blended chocolate and peanut butter only to discover that they were “two great tastes that taste great together!”
Blogging about web services and cloud computing may not be as much fun as writing a commercial for a tasty treat, but today’s announcement that Solace has partnered with Layer7 Technologies reminded me of that same idea: two things that are independently useful, and even better together.
Avoiding the potential carnage of high-speed trading
When it comes to car crashes, running into a wall twice as fast causes a lot more than double the damage. The same principle applies to trading systems: as the market accelerates and financial firms execute trades at breakneck pace, the potential impact of problems with their IT infrastructure increases exponentially.
So when it comes to keeping track of the behavior of their trading systems, looking in the rear view mirror doesn’t cut it. Firms need to be on top of any problems that affect their trading operations, whether they’re in the acquisition and flow of market data, the automated execution of trades, or the pre and post-trade risk management that keeps things in balance.
For Solace customers engaged in high-speed trading, one of our major advantages is the highly-granular real-time operational visibility we give system administrators. Our solution uses takes advantage of the parallel nature of hardware to provide real-time per-client statistics that software-based systems can’t without impacting performance, and many of which can’t be collected at all in multicast environments.
Hardware-based middleware gets some love in the Journal
The migration of middleware from software to hardware continues to gather momentum and market recognition, as evidenced today by an article in the Wall Street Journal about how financial services firms are implementing solutions that leverage performance-oriented hardware historically used in gaming and science to squeeze latency out of their trading systems.
Trading firms are transitioning from CPUs to field-programmable gate arrays, or FPGAs, graphics processing units, or GPUs, and cell processors. Such chips cut out the need for sending information across the operating system, and have the ability to run numerous processes in parallel, or simultaneously. CPUs actually have faster raw clockspeeds but can primarily only do one thing at a time, which ultimately slows things down.
“You’re basically sacrificing raw clockspeed for parallelism,” said Mike Dunne, chief technology officer at Activ Financial, which uses FPGAs in providing market data. “That trade-off was worth making, even though the clock speed’s lower, because we take advantage of the parallelism, as well as the power and the fine-grain memory control. You can get a 10-times or even 24-times increase in your performance.”
Solace was mentioned in the article by recently announced customer Liquidnet.
“We were frankly pushing our legacy systems to their limits,” said Keith Piraino, head of enterprise architecture at Liquidnet, a block-trading venue that recently announced plans to transition from software to hardware-based middleware from Solace Systems.
“We evaluated 10 different vendors for a solution and learned during this process that things are moving more into hardware,” he added, citing lower latency, the consistency of that lower latency, and lower costs among the reasons why Liquidnet chose to undergo hardware acceleration.
It’s nice to see one of our customers, and our story, get some recognition in such a respected publication.
Trading infrastructure that’s joined at the hip
Today we unveiled some interesting work we’ve been doing with Redline Trading to show the consolidation of their InRush ticker plant with the Solace message distribution layer for a wide range of market data delivery use cases.
Redline’s solution is a hybrid of software and hardware that is typically installed within a server to accelerate the various functions performed within a ticker plant. These includes everything you’d expect from a ticker plant: feed handling, order and price book functionality, even last value cache. Redline is fast, too — all of this takes place in an average of 8 microseconds for up to 10 million market data updates per second, with the kind of consistency you expect from a hardware-accelerated solution.
Our appliance picks up where a feed handler leaves off, reliably moving market data from feed to application whether that application is on the same machine, over a network or across the world.
Latest financial meme: consistent latency
Let’s face it, if you want to get attention on the Internet, you have to fall in line with the concept of memes. These are the ideas that take on a life of their own, such as the dramatic prairie dog or the VP dropping an F-bomb. Twitter’s version of memes is the concept of trending topics based on frequently tweeted keywords. This lets you see what topics people are talking about at a glance.
If dialog in the low latency finance community had that concept, it appears that “consistent latency” would be moving up the charts. For the majority of 2009, the focus was just on making everything faster. Lower the latency, shave a microsecond here and there, and so on. This year, it seems that people have figured out that the harder thing to achieve is predictable latency. If you’re going to turn decision making over to algos, you need to be confident that the information that feeds them is current.
How latency is like a sore knee
As a running form instructor, I’ve seen many examples of how poor form leads directly to a sore or injured body. Poor alignment causes fatigue. Landing on your heels causes knee pain. And don’t get me started on how most people run up hills. Little inefficiencies don’t stop you in your tracks, but at the end of the day they can keep you from achieving your peak performance.
It’s a lot like having many little sources of latency in your trading system. Each weak link in the process keeps you from reaching optimal performance and profitability.
The best way to help people see what is wrong with their running form is to use video analysis and isolate in on alignment, landing points, hip rotation, arm swing, etc.
Finding and fixing the sources of latency in trading systems takes a keen eye and sophisticated tools, too. Today we announced a partnership with TS-Associates, a leading supplier of latency monitoring solutions. They’ve added support for Solace message routers in their TipOff product, which is itself a hardware appliance dedicated to non-intrusive latency monitoring. In what may be the logical opposite of slow-motion video analysis, their solution studies end-to-end traffic in your trading environment and gives you details on which components in your system represent opportunities to cut out latency.
We’re bringing sexy (to the) back (office)
For the last few decades, from the early days of Gordon Gekko and Liar’s Poker to today’s focus on hedge funds and high frequency trading, the sex appeal has clearly centered around the front office. The press loves to write about it and we love to read about it. Every trade is like the proverbial iceberg, though — the trading decision is what everyone sees, but the majority of work happens in the murky waters below the surface where the considerably less sexy mid-and-back-office operations occur.
Last week Greg MacSweeney wrote a good article in Wall Street and Technology highlighting the back office as a new battleground for efficiency. After years of chasing zero latency for the front-office, the back office is comparatively archaic and badly in need of updating.
High frequency trading spotted drinking Cristal in the VIP room
High frequency trading (HFT) is the media’s new “it girl”, and is generating attention everywhere she goes.
First Forbes magazine did a cover story on The New Masters of Wall Street, highlighting the hedge funds, prop traders and big banks that are turning HFT into big business.
Then Traders Magazine did a related story about how the exchanges are responding in their Race to Zero Latency. Clearly the obsession with execution latency is being driven by the need to keep up with these ultra-fast consumers of liquidity.
And you know HFT is nearing its hype peak because last week the Daily Show did a special report on the subject.
Unlike Paris Hilton though, HFT is not making money because it is hot, it is hot because it is making money. Generating buckets of profits is one thing that never goes out of style.
Trading microseconds for nanoseconds
The co-location of market data systems near or inside exchanges is becoming big business. The ultra-low latency high frequency trading systems that you find in these facilities are niche applications to be sure, but what a niche! NYSE Euronext recently committed to build a 400,000 square foot co-location facility in New Jersey. That’s a big investment to make in something NYSE Euronext CEO Steve Rubinow describes as being for “only the most obsessive traders.”
How obsessive? Architects building these systems measure latency in microseconds, and the best applications exhibit just tens of microseconds of end-to-end latency. Shaving microseconds is like dropping weight before your prize fight weigh-in—whatever it takes, get it down.
To help these latency obsessed traders develop even faster trading systems, Solace has extended its Unified Messaging API to include a shared-memory transport based on inter-process communication (IPC). This capability lets two applications share information using Solace’s API with less than 700 nanoseconds of average latency in a shared memory environment. Yes, I said nano — billionths of a second. Remember the famous Tabb Report on The Value of a Millisecond? There are a million nanoseconds in a millisecond. 700 nanoseconds is a scant seven-tenths of a microsecond.
To be clear, IPC is a highly-specialized technique that only certain systems can leverage because it occurs within the confines of a single server. For example, when the components of a high-frequency trading system (feed handler, algo, risk assessment, order execution) have been consolidated onto a high-powered multi-core server within a collocation facility. Today these applications run on many machines and share data using low latency messaging (like Solace’s). Shared memory transport among applications running on a single server eliminates the few microseconds associated with network hops and additional time lags associated with copying memory around between applications. And since IPC is now available as part of the same API customers already use for ultra low latency and other kinds of messaging, applications get the speed they need without giving up the familiar API or the flexibility to redeploy in a networked scenario as needed.
As always, we’re not publishing some mysterious single number with no detail on what it means. A white paper describing the environment and parameters of the tests is available for download on our website so customers can dig into the facts and even reproduce the results using their own systems and data. In fact, we did all the testing a quad-core 3GHz Intel Xeon E5450 server because not everyone has the latest Intel Nehalem.
HFT architects have generally been exempt from corporate technology standards because the stakes are so high they can justify whatever makes them faster. With Solace, HFT no longer needs to be an exception. The same messaging API that is speeding up back office and front office networked trading can be used to speed up collocated HFT trading as well.
Solace and Sun collaborate to simplify financial networks
Many people think Sun Microsystems is in limbo—stuck between the company they were and what they’ll become as part of Oracle. Competitors have suggested that Sun has stopped innovating and that it’s time to move to another platform. But as a close partner of Sun’s, I can assure you that the picture inside Sun is very different. Their best minds are still generating great ideas, solving customer problems and pushing the boundary with innovative new technology. Some of you may have seen Oracle’s recent ad in the Wall Street Journal (and many other places) declaring that they are looking forward to taking on IBM head on in the hardware business.
Solace signed a partnership with Sun shortly before the Oracle acquisition was announced in the spring. Sun’s technology assets and Solace’s high-performance JMS solution have generated interest with Sun customers since we began working together more than a year ago. Sun is a powerhouse in the data center of many of the country’s largest, most demanding companies, including most of the major banks. For our part, Solace is reshaping what has traditionally been software-based middleware into a hardware asset more like a network appliance than a server.
The combination of these two strengths is the basis of a new prototype appliance we demonstrated in the Sun booth at the SIBOS show in Hong Kong September 14-18. This new Sun financial network appliance combines the massive throughput and easy management of Solace’s messaging technology with Sun’s hardware and software to build a flexible solution for integration between back office banking systems and leading payment networks. Integration with payment systems is a notoriously complicated thing to get right, and the turnkey approach of this appliance can make connectivity faster, easier and more profitable for participants of banking inter-networks.
The appliance is based on the Sun Netra x4450 chassis, a powerful virtualization server that’s designed for telco-grade reliability in a low-power 4U form factor. It includes Solace’s JMS broker and middleware functionality with appliance-style turnkey administration. Finally, it includes Sun’s Secure Network Layer software as well as the Sun Integrator platform for easy integration of banking assets.
In related news, Solace announced a new version of our JMS protocol that’s used for this appliance, and is also available directly from Solace. It sets new standards for JMS performance with support for 100,000 persistent and 11 million non-persistent messages per second.
We look forward to a long and successful relationship with Sun (and eventually Oracle).