October 22nd, 2019 - Financial, Global Connectivity
By Scott Feagans, TNS’ Vice President of Technology & Strategy, Financial Services Division
Market data is crucial to any trading firm operating in today’s financial services industry and the speed to which this data is received is crucial to executing orders faster than competitors. This has always been the case for HFT participants as ultra-low latency is what it’s all about; but a new technology acquired by TNS has disrupted the market on a much larger, global scale, and it includes a majority of the major equities, derivatives, futures and options markets.
So, what is this disruptive, cutting edge technology? Let’s just rewind a little to current market offerings and traditional environments that use network architecture which is referred to as layer 3. In a layer 3, tier-based architecture there are multiple switch hops in the network which can add several hundreds of nanoseconds for every switch hop in place. Therefore, even when the industry’s lowest latency layer 3 switches (e.g. Arista 7150s) are deployed, over 1,200 nanoseconds are added when three or more switch hops are encountered before reaching the exchange.
What is Layer 1?
Layer 1 is an ultra-low latency switch architecture that utilizes FPGA technology to replicate network signals extremely fast. Until now, Layer 1 had been used exclusively by individual HFTs, giving them superior performance and significant edge in the market compared to managed service providers (MSPs) offering shared exchange connectivity utilizing traditional layer 3 architecture.
NetXpress co-developed a custom FPGA code with Arista (formerly Metamako) and deployed the first shared Layer 1 product in 2017. In less than two years since, TNS has acquired NetXpress and Layer 1 has been installed in multiple data centers globally.
TNS’ Layer 1 is being deployed to all TNS managed hosting sites. This architecture has the capability to reduce typical speeds for traditional layer 3 environments from ~1,200 nanoseconds to an almost unheard of 5-95 nanoseconds. In other words, TNS’ Layer 1 is approximately 10X faster than traditional layer 3 architectures. This can translate into traders being able to execute strategies and access market data in a fraction of the time of conventional architectures.
More importantly, TNS’ Layer 1 has flattened out the connectivity architecture. The result is an ultra-low latency solution that can eliminate unnecessary switch hops, provides increased reliability by significantly reducing points of failure, all while increasing predictability and precision.
Is it really that good?
Yes, it really is and it’s important to remember that not only was TNS (then NetXpress) first to market, but in the two years since it was introduced, Layer 1 has demonstrated its capabilities in key relevant performance and reliability categories.
TNS is now the only service provider that has Layer 1 connectivity deployed globally. With almost three years of reliable, secure and superior ultra-low latency connectivity, TNS can deliver Layer 1 data to clients at up to 10X faster speeds than its closest competitor.
The Layer 1 revolution is just beginning, and it is a major disruptor for trading firms and financial participants who are seeking ultra-low latency and a competitive advantage. It is no longer the best kept secret in trading. For current and future TNS financial services customers there will be more industry firsts on the horizon.