Sub-Nanosecond Time Stamps Could Feed Regulatory Trails
March 5, 2012
The supplier of a time service center at a Savvis market center in Weehawken, N.J., says its sub-nanosecond readouts are now compliant with the Financial Industry Regulatory Authority’s Order Audit Trail System and is likely to be compliant with any Consolidated Audit Trail that might be specified by the Securities and Exchange Commission.
Certichron, based in San Jose, Calif., said that the time stamping service that it put in place in 2011 at the Savvis NJ2 market center has been upgraded to act as a FINRA OATS Time Verification Service, reading back the time of day from a device under management and creating a record that cannot be repudiated.
“As the whole regulatory and business requirements develop over the very near term, subsecnd reporting will be absolutely key,’’ the firm’s president, Tom Russell said.
The system, according to chief technology officer Todd S. Glassey, uses three or more records of a stamp to avoid any technical faults or malicious attempts to reset time. Attempts to reset time or forge records will fail, because the time stamps produced will be wrong, he said.
Every record that gets sent out by the service gets verified and any attempt to alter a record gets identified, Russell said.
The system uses a hub-and-spoke architecture. The hub at the Savvis center can be accessed by users of the service with “no long lines latency and no Internet liabilities,’’ he said. And “virtually any” load can be handled.
The method of setting and verifying time creates “an impossibly strong evidence model,’’ for distributing the kinds of sub-nanosecond time stamps required by algorithmically-driven high-speed trading operations, Glassey said.
Toward the end of 20112, FINRA began to aggregate order information from across all FINRA, NYSE Euronext and Nasdaq OMX equity markets and began the process of developing comprehensive cross market surveillance patterns that will examine trading activity across all markets at one time.
“ A significant enhancement to FINRA's audit trail is the expansion of Order Audit Trail Sysem to include all National Market System issues and the elimination of the NYSE's Order Tracking System,’’ said FINRA chief executive Richard Ketchum.
At some point this year, the Securities and Exchange Commission is expected to release its specification for an industry-wide tracking system, that chairman Mary L. Schapiro has called the Consolidated Audit Trail.
That trail may require real-time reporting of transactions.
The timebase itself is operated and maintained by the National Institute of Standards and Technology. The NIST Internet Time Service distributes time signals as part of critical infrastructure for the United States.
kIn this case, the intermediary, Certichron, says its system uses a technology designed for the company's founder by the NIST Time and Frequency Laboratory which allowed the remote installation of the US Timebase in Tokyo Japan. The intent was to make precise and consistent timing a "bolt-on assurance resource."