High-speed access to the capital markets is one of the most important requirements in an everyday trading business. Whether you or your customers are doing the transactions: Every. Second. Counts.
Although it is possible to set up your own high-speed network connectivity with the financial service partners you want to do business with, you will soon find that building your own infrastructure is costly, resource-draining and downright unnecessary.
Instead of sourcing different suppliers and maintaining heavy data feeds, you can join a financial community, more specifically a financial extranet.
This means that you become part of a global network of buy-side firms, sell-side firms, trading venues, clearing houses, securities depositories, market data providers and other types of institutional financial services firms. You will even find that the counterparties you are eager to work with are already part of such a community.
As speed is an important aspect in this business, financial networks are built with the most reliable, latency-sensitive and high-end connectivity lines that can transmit staggering amounts of data per second. The fastest connection is achieved through wireless transmission which ensures the lowest latency possible between two connected points. For example, latency for a round trip from Chicago to New York, one of the most important trading connections in the world, via a fibre network is 13 milliseconds at best while the same is achieved in 8 milliseconds via a microwave connection.
This means that you will be able to respond 5 milliseconds faster to relevant market activity – increasing your competitive advantage. Also, direct access to major trading venues results in tight spreads and more profit for yourself and your customers.
Leased network lines are secure, robust and adaptable to growth, meaning that you can request more bandwhidth when you want new connections or increase traffic with existing partners.
Not only will your speed in trading improve when working with a financial extranet, you will also be able to connect to your counterparties much faster. It won't be weeks to get the right infrastructure in place, but days.
A financial network community opens the door to new markets and suppliers.
Without much more effort, you can easily get a connection to trading venues in new emerging markets. Markets that your competitors do not offer.
The same goes for getting access to counterparties that you are obliged to partner with for compliance as well as satisfying regulatory requirements. Whether you need to connect to Smart Order Routing systems to find the best execution deals for customers as prescribed by the MiFid II regulation, or to SEFs and OTFs that are mandated by the Dodd-Frank policy.
There are many different financial network communities to choose from, and you should choose the one that best fits your own business needs. It's important to consider different aspects when signing up to a network.
To start with, look for a financial community that has great global reach and provides a reliable and secure network infrastructure. Also make sure that the financial network provider understands your business and offers world-class customer service. Check if the pricing is transparent and that you only pay for what you use. Finally, request to be connected to the network as soon as possible, meaning days and not weeks.
At Drebbel, we work with financial extranet providers that have great reputations when it comes to customer service, pricing and provisioning. Together we can determine which one will best suit your needs.