Today, everything is getting faster: our mobile phones, sports cars, Olympic athletes. Most noticeably, our computers.
But speed doesn’t come without problems. As we process more data at higher speeds across more servers, it becomes difficult to ensure data is reliable. Reliability is particularly important for the financial services industry where there are significant consequences for those that can’t prove their data is trustworthy.
Accurate time forms the bedrock of data integrity in electronic trading, and modern time synchronization solutions are set to see huge growth in demand as the Asian financial market expands in both new and old global arenas.
So, what is time synchronization?
Time synchronization makes sure that your data is in the right order. Servers can process thousands of pieces of data every second, so the time on servers need to be synchronized directly to an accurate time-source such as UTC (Coordinated Universal Time). If it isn’t, the clocks on your servers will drift. If your clock drifts by even a fraction of a second, your data log will be incorrect, and everything will look like it happened in the wrong order.
In Europe and the United States, firm laws have been put in place to control this process. The most stringent regulation, MiFID II, stipulates that the time on the servers of some active trading venues must be correct within 100 microseconds and traceable back to UTC. That’s one hundred millionths of a second.
Widespread adoption of the best practice
Although Asian markets do not yet have specific regulations on this topic, trading venues across the continent are increasingly adopting MiFID regulations. As stated in the October 2017 Baker McKenzie report, “It comes as no surprise that the legislation’s impact extends beyond the EU”.
This widespread adoption of MiFID II standards promotes a global system of best timing practice. When a financial company is unable to state with confidence exactly what happened when looking at their data logs, they are making themselves vulnerable. Transactions may be canceled and any legal disputes will be difficult to resolve.
As seen in the best-selling book on high-frequency trading, Flash Boys, there can be even more severe consequences. The book highlights how those with faster connections were able to manipulate the market to gain a marked advantage, as milliseconds can mean big money on the stock exchange. Such events led to regulations on precision timing being brought in, to allow the market to be moderated more effectively.
Precision timing clearly isn’t a redundant regulatory process. The accuracy of computing services is being taken increasingly seriously by leading global financial institutions, as its ability to prevent damaging regulatory consequences becomes clearer.
Setting a global standard
Five of the world’s top 10 financial centers are now based in Asia. To continue their growth in the global arena and ensure they can trade globally, many multinational firms based in Asia are required to comply with European and US financial regulations.
Even those that don’t trade directly with the global West are still feeling the impact of the timing regulation. As investment in financial services remains extremely competitive in the Asia-Pacific region, high internal standards are adopted to build confidence in investors. As stated by the leader of a multinational firm, “Even banks that are not technically captured by those or other criteria, may choose to comply with the rules, which are seen as giving more protection to investors”.
Modern solutions are making a difference
As time synchronization is set to expand across the global market in the next year, cheaper and simpler solutions have been designed that are attracting the attention of customers in unregulated markets. Traditionally, companies have been reluctant to adopt precision timing tools unless necessary, as they require a significant investment of time and money.
The firm would need to install and maintain their own grandmaster clocks and a satellite receiver at every active trading venue. These satellite receivers would need to be replaced every 3 - 5 years, and they require roof space. Timing hardware is resource heavy for IT staff to manage and monitor, and in crowded cities, the cost often amounts to more than office rent.
Flexible solutions are opening up time
Traceable Time as a Service (TTaaS) is a modern solution that delivers time through a network - meaning that zero hardware is required. No satellite receiver means no roof access is needed, saving time and resources. Because the time is installed on servers through software, it is easy to both set-up and scale across all trading venues.
Network-delivered timing can bring precision time to both the cloud and ‘on-prem’ locations with ease. Traditional hardware solutions, on the other hand, are currently unable to reach cloud environments.
The whole world is seeing an enormous migration to cloud, as the events of 2020 have accelerated global digitalization. According to Nomura Instinet’s respected biannual CIO ‘Spending Survey’, 68 percent of global CIOs now state that “migrating to the public cloud and/or expanding private cloud” is a top driver of IT spending, in contrast to 48 percent last September. The Asia-Pacific region is feeling this shift closely, as it hosts the vast majority of the world’s crypto exchanges.
New timing solutions are able to address another problem that opens timing up to new markets. Naturally, different companies have different timing requirements. Some may want a ‘complete’ timekeeping product that has everything you need, including a time feed, monitoring software, synchronization tools, and data logging capabilities.
Other firms may want just one of these components. Traceable Time as a Service can create a solution that is suited to the needs of different companies. This means that firms aren’t investing unnecessarily in a product that they don’t need.
Financial services firms across Asia are set to improve their competitive edge by adopting a precise timing solution. This process has been made more feasible by the development of new timing solutions that are more cost-effective and that make more sense for adoption in new markets.
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Dion Travagliante, Head of North America, Hoptroff