Morgan Stanley Tracking Delays Throughout the "Trading Loop"
October 19, 2009
Morgan Stanley is no longer satisfied with tracking the milliseconds it takes for market data to come into its trading plants in New York and London and emerge as buy or sell orders.
Now, the securities trading and investment management firm is going to watch the travel time in the entire "trading loop" between its trading infrastructure in the United States and Europe and electronic venues such as the New York Stock Exchange, Euronext, Direct Edge, BATS or Chi-X Europe.
To monitor those milliseconds at every server, hop and connection along the way, Morgan said it will begin to implement a latency management system from Corvil, a Dublin firm that supplies latency management software to exchanges, alternative trading venues, investment banks and market makers.
Morgan Stanley will use CorvilNet to monitor, analyze and optimize their market data in-house at plants in New York and London, as well as CorvilClear to monitor "inter-party latency" on the way to execution venues.
In particular, CorvilClear will allow Morgan Stanley to quickly see where and why latency in the trading loop is occurring, and how to minimize it, down to the microsecond, Corvil contends.
The bank has been utilizing an in-house system to monitor trip time and delays within its trading plant. But "what we really wanted was to monitor the latency that is incurred as we go out to external venues such as multilateral trading facilities (MTFs), exchanges and electronic communications networks (ECNs)," explained Kevin Twitchen, executive director at Morgan Stanley in London.
"We can tune the plant to be as efficient as possible, but, we do not get to see the full picture of the world around-- that is, the venues we actually have to execute trades in," he said. "This is why we looked to Corvil."
The Corvil system will be deployed in stages and measure latency at every step, from Morgan's servers to electronic venues' matching engines as well as any routers or switches in between, said Twitchen.
"We want to work with the exchanges and MTFs to instrument the execution venue," he said. "It's going to be a step-by-step rollout as we will work with the venues to get a latency view."
Traditionally, Corvil's business has been working with institutions like Morgan Stanley to help them with the management and monitoring of latency within their infrastructure, said Donal Byrne, CEO of Corvil, which has operations in New York, London and Dublin.
"Precise monitoring of latency both within Morgan's trading plant and to the exchanges is critical to optimal performance of the firm's trading strategies, continued Twitchen.
But now, with its CorvilClear product, "we intend to collaborate closely with all of our exchange and MTF partners to provide real-time latency transparency'' among all the servers and data centers involved in a transaction, he said.
Launched in April, CorvilClear, is also used by Credit Suisse and pan-European trading platform Turquoise.
"Over the last year, some of the focus of that has moved outside of the traditional four walls of a particular customer's infrastructure," said Byrne. "They are now challenged with how to address latency and get better information and understanding of latency as messages, market data and order transactions traverse right to the exchange going thru various third party pieces of infrastructure. What we are seeing is that it's being worked from both sides so the participants are asking for this latency information from the exchanges and some of the exchanges are proving to be willing to be more transparent."
