26 May 2020

Why not all ethernet private lines are created equal and why it matters

There are lots of reasons why it may make sense for financial trading firms to incorporate ethernet private lines (EPLs) into their network strategies.

By Michael Bauer, BSO Technical Pre-Sales Director

Much depends on the trading locations involved, the tasks at hand, a company’s business model and the existing infrastructure. Any or all of these factors could point toward ethernet private lines (EPLs) as the most viable of networking options.

But what not everyone always realises is that the term “ethernet private line” covers an extremely wide range of products and solutions.

In other words, the key question is not about whether a firm incorporates ethernet into its network strategy. It is about what kind of ethernet solution is being considered.


Matching up ethernet private line requirements

Latency, cost and bandwidth are arguably the three factors that come up most frequently in network decision-making discussions.

While microwave technology offers the lowest available latency, EPLs can be much less expensive and handle much more data.

Consider firms that run automated trading models involving extensive number crunching and heavy transfers of data. They may have little choice but to rely on ethernet in their networks since microwave solutions generally cannot cope with their bandwidth requirements. Even for latency-sensitive firms, microwave may not always be practical or cost-efficient in certain geographies.

But ethernet has been implemented in different ways.  Identifying the right ethernet private line solution, with the correct level of service, can make an enormous difference in terms of performance and flexibility.


EPL certification is not enough

Metro Ethernet Forum (MEF), a body set up by an association of ethernet service providers and vendors, provides certifications for ethernet products. But they tend to cover their compatibility, not their suitability.

An EPL may have MEF certification but that most likely only tells you that it will work – not that it will be the optimum ethernet solution for your network needs.

For instance, is the path or routing for a given EPL fixed? Some trading models depend on deterministic latency, so can an EPL provide that? Is there a back-up route? The answers to all of those questions will depend on the solution a trading firm chooses.


A host of variables

Some ethernet private lines will be much faster than others. Some will provide dynamic routing. Some will have a fixed route. Some have deterministic latency and some variable.

Take Ethernet over Multiprotocol Label Switching, or EoMPLS. An EPL based on that technology could have variable latency, which may not be suitable for some trading strategies.

On the other hand, having a dynamic EPL with the ability to manage your routing can be highly suitable for business models that do not require latency determinism.


Working with the right providers

Since ethernet is not commoditised, and since MEF certification only tells you part of the story, it, therefore, becomes vital that a trading firm’s network providers appreciate the nature of the underlying business.

Providers need to understand that ethernet is not a one-size-fits-all technology. Given the sheer variety of financial market participants, business models, geographic footprints and asset class characteristics, those business requirements are likely to be different every time.

Matching up business requirements with network requirements thus can be considered both an art and a science.

At BSO, we know that when we’re incorporating ethernet into a firm’s network, we need to be proficient at both.

If we can help you with your network, please speak with our experts today.