How to spot and fix network latency before it costs your trading floor money_

Reducing network latency should be a high priority for businesses operating in the financial markets. So, knowing how to measure latency and identify potential issues is vital. We explore the main causes of high latency, key measurement metrics and how to fix network latency issues before they cost your trading floor money.

Why is network latency important in financial markets?

In financial markets, accurate and up-to-date data is extremely important to trading transactions. To make the most informed decisions, traders need to access data from across the world as close to instantaneously as possible. Trading floors’ network infrastructures need to be quick and low latency is the only way to achieve this.  

In high frequency trading environments, mere milliseconds can impact revenues, and for firms that use automated trading tools for trading large volumes, it’s vital to have high performing systems that can deliver low latency and quick response times. Therefore, IT and networking teams need to be able to spot potential network latency problems and fix them before they have far-reaching consequences on their firms’ performance. Whether in-house or outsourced, ensure your IT team is able to identify latency issues and resolve root network problems quickly.

What causes network latency?

There are a few reasons for high network latency, some of which can be easily identified and rectified, but others less so. Below are some of the most common causes of network latency issues, across infrastructure components, that you need to consider.

i) Distance

One of the main causes of network latency is distance, specifically the distance between the device requesting data and the server responding to that request. If your business is located in London, for example, trading with markets in Beijing can be challenging when latency is high. A good way to minimise distance concerns is to partner with a network infrastructure provider which has a global network infrastructure and cloud capabilities so that your business can maintain its reach without compromising on delivery.

ii) Software and application issues

When it comes to software performance, there are a few things that can contribute to poor latency, specifically:

• Bloated websites with large files, heavy content and ample third-party website embedding can perform very slowly, leading to high latency and slow load times.

• Poorly optimised databases that use incorrect indexing and complicated tables can also slow your website down and lead to database over-utilisation if not scaled correctly.

• Applications overloaded with traffic requests can experience increased lag which slows access to your business.

Easily scalable and available infrastructure can mitigate many of the risks associated with software-induced latency issues, as you can increase or decrease the computing capacity you need to meet network demands on your trading floor.

iii) Hardware and equipment issues

Hardware elements can also have an impact on latency performance; some common causes to keep an eye out for include:

• Your internet connection. Fibre optic internet connection performs better than satellite internet does, so ensuring your internet connection is up-to-date and using the latest connectivity solution can help you access the lowest network latency available.

• If your systems are running low on memory space, performance can be compromised as your operating systems try to meet programs’ RAM requirements. Ensure you have all the RAM necessary to meet current and medium-term network needs.

• The more routers you have processing the data packets being received and transmitted between them, the more increased your latency becomes. Although difficult in larger companies, minimising the number of routers available for use can make a difference to latency speeds.

Virtualising your infrastructure would mitigate hardware risk entirely, but if opting for physical data centres of your own, ensuring your equipment is current and optimised is a priority when looking to maintain or improve latency times.

How to measure network latency

Before you can diagnose the cause of any problems and fix network latency issues, you first need to measure your latency speed. Using one or all of the below measurement metrics on a regular basis can help you monitor your latency levels and spot problems as they arise.

i) Round trip time

Referring to the total amount of time it takes - in milliseconds - for a data packet to travel from its source to the requesting destination and back, Round Trip Time (RTT) is a common latency measurement metric. However, RTT accuracy can be uncertain when the returning route the data packet is transmitted through differs from the original route from which it came.

ii) Time to first byte

Time to First Byte (TTFB) measures the difference in time between when a data packet leaves its source, to the time it takes for the first byte of data to reach its destination. It also refers to the time a requesting server has to wait for a response from the source of the data packet. RTT and TTFB can both be measured through your CLI or via browser-based tools.

iii) Ping

Another commonly used metric for measuring latency, ping measures the time it takes for 32 bytes of data to reach its requesting destination, plus the time it takes to receive a returning response. Although good for quick testing, ping doesn’t provide adequate information on problems routes could be experiencing resulting in the increased lag. As such, network and IT teams should use additional network testing tools to diagnose latency-causing issues in their networks.

How to fix network latency issues:

Knowing the causes of network latency and key measurement metrics is one thing, but how can you address and resolve latency problems? Here are some of the best approaches to help you fix network latency issues.

i) Carry out assessments and audits to identify network latency issues

The best way to mitigate latency problems is to ensure your network infrastructure is running at an optimal level at all times. Conducting a network assessment regularly is a good way to keep track of your network’s performance and enable you to spot network latency problems early.

ii) Utilise network performance monitoring tools

Network performance monitoring tools are really useful for proactive monitoring and fast and efficient identification and resolution of any issues that are impacting your performance. These solutions use automation to help IT teams identify latency issues and give them the information they need to make improvements. 

Learn more about the solutions available and their benefits in our blog: Best network performance monitoring tools for traders.

iii) Exploring cloud infrastructure solutions

A good way to optimise your network infrastructure and quickly fix network latency problems is to invest in cloud solutions. Cloud infrastructure, especially when delivered by a network provider with a strong focus on low latency solutions, can have a huge impact on your performance and remove a lot of the hassle that comes with maintaining and optimising network infrastructure. 

If you’re wondering which cloud solutions are best for your business, check out our Public vs. Private vs. Hybrid Cloud checklist, which offers handy information about the different options.

iiii) Consider experienced low network latency connectivity providers

Using a network connectivity provider, especially one with experience in supporting businesses operating in the financial markets, can ease the burden of infrastructure management and enhance your network performance and capabilities.

BSO offers managed services and support to support traders and FSI businesses. We’ve developed strong partnerships with major global exchanges and built market-leading low latency connectivity solutions to empower organisations most in need of rapid routes to financial markets.

Summary

The impact of latency on business performance can’t be stressed enough, especially when you run the risk of losing your trading floor money. Ensure your IT team has the knowledge and tools at their disposal to identify and fix network latency issues - as every second counts and latency matters.

Learn more about our low latency network solutions for financial services and crypto trading.