Gaining a latency edge with radio frequency networks
By Mike Bauer, Technical Pre-Sales Director at BSO
For any trading firm that is focused on latency, radio frequency (RF) networks are the undisputed weapon of choice.
Compared with fibre optics, wireless technology provides trading firms with a decisive edge. RF can shave precious microseconds off round-trip times, which in turn can make the difference between a trading firm getting a profitable trade done, or missing out and seeing prices move against it.
When talking about RF, most discussion is about network speed, and with good reason. But companies also need to focus on flexibility and adaptability.
Trading firms need a network supplier such as BSO that understands how to incorporate RF pathways within a wider network strategy. For instance, firms still need redundancy and they still need cost-effective solutions that are fit-for-purpose.
These demands are only set to intensify because all the signs point to increased take-up of RF networking in the trading space.
The ascent of radio frequency
RF networks began to appear a little less than a decade ago as network providers competed to have the fastest route between Chicago and New York.
The situation increased the incentive for RF development, and soon after the first microwave networks were deployed, offering low-latency traders much faster round trips than even the quickest available fibre optic routes.
The idea of using RF networks in markets has actually been around for several decades. In 1989, one academic journal published an article on network technology for financial services, noting that microwave represented an attractive alternative to the then-dominant communications method of the day: copper wires.
But at that time, RF’s line-of-sight requirement and other factors made it impractical. At the time, private RF networks were actually illegal in Europe. Meanwhile, fibre optic networks – a relatively new development for trading firms – were taking off.
Today, RF networks are growing briskly. As evidence, one recent study forecasts the market for radio frequency transmission equipment to rise to $6.12 billion by 2025 from $4.93 billion in 2018.
Three reasons why radio frequency is a winning proposition
Firstly, the rising demand for RF networks in part stems from the industry’s ability to keep improving on the technological side. The radio frequency hardware industry is constantly looking to innovate in ways to address once-bothersome factors such as the possibility of interference from nearby networks.
The second reason why RF continues to gain users is that exchanges have improved their own performance. The question of jitter matters, because the more jitter there is in a system, the more it potentially robs firms of the benefits of being a few microseconds faster. That factor no longer appears to be a major issue.
And lastly, there is, of course, the factor that made RF so successful in the first place. Put simply, there is nothing available on the market that is faster. Getting the best bids and offers will always be a function of where you are in the order queue. To be successful, trading firms need the speed that RF delivers.
For most firms, RF needs to be seen as a part of a wider network strategy, one that features the redundancy that fibre optics offers and the speed that RF does. When trading firms encounter network issues, they need to be able to quickly reroute their order traffic in the most optimum way.
For the low latency trading community though, one thing is paramount. Above all, they need to work with network specialist firms that really understand not only their business needs but also the world of radio frequency. Network providers need to be ready to provide bespoke solutions, tailored to the unique requirements of their customers.
We have made it our business at BSO by doing just that, as the leaders in RF technology.
Are you interested in incorporating RF into your network strategy?