As the low-latency race continues, it’s interesting to see how each element of the processing chain is being evaluated – almost as though it was for the first time.
The Internet Protocol has become the standard for most communication across the industry. It’s fit for purpose, providing the equivalent of a universal network adapter so that anyone can communicate with anyone.
But at the same time, IP is fat – it takes maybe five times more space than optimised, proprietary protocols to move the same amount of data because of the implicit overheads within IP data packaging.
The big investment firms and hedge funds are trying to skinny-down every bit of their trading process, in the same way that a Formula One racing team tries to cut out every unnecessary gram of weight from its racing cars. They’re cutting down the number
of boxes and switches between themselves and each trading venue. They’re cutting down the distance between their trading platforms so that the electrons have to travel as short a distance as possible. And they are looking for faster and faster data transfer
Will they start to strip bits and bytes out of IP, so that it’s no longer really IP?
Will they go back to the old ways and develop proprietary protocols that are stripped down to the bare minimum for maximum speed?
Or will we see a new standard protocol appear that will knock the socks off IP in a low-latency environment?
Where there’s a will, there’s a way. And where lots of money is involved, there’s usually lots of will too!