Colt's Fastnet Ultra Optimises Connections Across Key Trading Routes

London-based network services specialist Colt’s announcement this week of its Fastnet Ultra low-latency connectivity for trading firms formalises its solutions for the high-performance space, most visibly implemented to date by Nomura last autumn.

Underpinning the new capabilities are the adoption of Infinera optical switches, which reduce the number of physical network hops on key order traffic routes, and the optimisation of transport across those routes, which include links from London to financial centres in Frankfurt, Brussels, Paris, Amsterdam and Chicago.

According to Tony Moulange, senior business development manager who joined Colt in the autumn, Fastnet Ultra will help integrated investment banks and their prime brokerage operations achieve ultra low latency connectivity with execution venues, and make those connectivity capabilities available to their own clients, including proprietary trading firms, hedge funds and other high frequency trading shops.

Moulange says the uptick in interest in latency measurement – and the creation of a FIX Protocol Ltd. working group dedicated to the topic – underscore the fact that the marketplace is now taking latency seriously. Fastnet Ultra is aimed at meeting this need, which Moulange says is gaining momentum in terms of demand for low-latency connectivity capabilities. “Clients,” he says, “are picking up from where they left off” prior to the holiday period.

Colt – which started life as City of London Telecommunications – prides itself on owning the fibre-optic network it runs in London. Fastnet Ultra, which began operation last September but is being formally rolled out in 2010, is aimed at minimising latency across the network to help clients’ achieve best execution.

Colt’s FastNet Ultra portfolio will include ultra low latency connectivity, using wavelength or Ethernet services, and proximity hosting services for 20 European exchanges and multilateral trading facilities (MTFs). These solutions will be supported by a guaranteed service level agreement (SLA) ensuring a consistent level of latency and no fluctuations as a result of fixed, defined and un-contended paths through the network.

To support Fastnet Ultra, Colt has invested in its pan-European network using photonic integrated circuits from Infinera. These will allow Fastnet Ultra to deliver high capacity links capable of up to 1.6 Terabits per second at a significantly lower latency. This kind of set-up, Moulange points out, has until now been used only for connectivity between telecommunications providers themselves.

At the same time, Colt is reducing latency on critical trading routes between key financial centres, including routes to London, Chicago, Frankfurt, Paris, Brussels and Amsterdam. Of particular importance, Moulange says, is the link between Frankfurt, London and Chicago, homes to the Eurex, Liffe and Chicago Mercantile Exchange (CME) derivatives markets, respectively. This connection, he says, is at “the core of what everyone wants to do.”

As part of its offering, Colt will be working closely with clients to determine the best location for their trading systems. Determining this ‘centre of gravity’, can be key to optimising overall order turnaround times for market practitioners that trade on multiple markets.

“Clients can’t be in every data centre,” says Moulange. So it’s important to locate execution engines at a site that takes into consideration ongoing business practices, including close proximity to, or collocation at, those venues that account for most volume or business. Market practitioners not only will want to ensure their orders are hitting prices with minimal latency, but they also need fast delivery of order book information to trigger trading actions in the first place.

For Moulange, Fastnet Ultra’s latency headroom is only the beginning. Having shifted from 1 gigE to 10 gigE capability, the marketplace could achieve 40 gigE in 2010, he says, driving latency figures significantly lower. This would turn attention on a latency basis from the network to the applications, whether they’re the broker execution gateway or the execution venue matching engine.