High Performance in Trading September 19, 2011 Raymond Russell, CTO

Agenda Low-latency = high performance? Low-latency components Trading system performance Beyond latency

Market-leader in Latency Management: Over 20 market maker and proprietary trading firms 9 of the G14 group of broker/dealers monitor order flow performance 7 out of the top 10 investment banks as active customers* 18 additional tier 2 banks and brokers 15+ market maker and high frequency trading firms 14 exchanges, including 10 major global exchanges *Source FT.com League Tables, % of Equities Fees collected in Q Sell-Side Exchanges Providers Trading Network Buy-Side Introduction to Corvil

For components, basically true: Matching engine: order to execution DMA engine: risk-checking and change-of-custody Feed-handler: exchange-tick to book-update Low-latency = High Performance?

Trading imperatives driving high-performance: Lifting trades before the competition does Response time and speed of access to market Execute trades at optimal price and speed Scale and timing Competitive but profitable spreads Tracking the market to keep books balanced Arbitrage Trading Market Making Algorithmic Trading

Low-latency = High Performance? Q.How to measure algorithm performance? Execute trades at optimal price and speed Scale and timing Execute trades at optimal price and speed Scale and timing Many fast orders? One long transaction? Market slippage? Algorithmic Trading

Low-latency = High Performance? Q.How to measure algorithm performance? A.Tick-to-order latency Performance determined by system latency: Quote  Market-data  Strategy  Order-entry  Trade Market data Order Execute trades at optimal price and speed Scale and timing Execute trades at optimal price and speed Scale and timing Algorithmic Trading

Low-latency = High Performance? Q.What drives component latency? A.In well-designed and well–tuned components, load drives latency Latency in absence of load a sign of poor design or configuration Feed-handler latency Market-data rate

Summary Latency a critical performance metric for components High-performance trading demands system-wide performance Capacity under load as important a dimension as latency