Breaking Down Financial Barriers and Maximising Revenue Opportunities for Financial Trading in Emerging Markets

by Jeff Kim, COO for CDNetworks US/EMEA

The revenue opportunity presented by emerging market retail investors is growing rapidly, especially for those trading currencies online. Forex trading firms are spending significant shares of their budgets trying to improve their trading IT infrastructure to get as close as possible to zero-latency trading and be able to break barriers for trade with emerging markets. Despite significant IT investment by trading platforms located in the Western hemisphere, retail investors in emerging market regions of the world struggle with poor performance over the WAN.

With a simple improvement to their global content distribution infrastructure, leading trading platforms are significantly boosting revenue from e-Forex trading around the world.

Need for Improved e-Forex Performance in Emerging Markets
Today, more than 75% of Forex traders in the US and UK trade electronically, and approximately half of the Forex market participants in Asia Pacific use electronic systems. These combined trends toward e‐Forex hold significant impact for electronic trading platforms that can extend high‐quality services into emerging markets. The market opportunity is simply too large to ignore when one considers that the retail investor communities in India and China far outpace those of all other countries.

For Forex trading platforms based in North America and Europe to win over retail investors in emerging markets, they must ensure reliable high‐performance when sending and receiving data such as prices, orders, and reference data across networks which they do not control. This places an extreme burden on IT leaders and Global Forex executives as they are tasked with finding ways to minimise latency over the middle mile of the public Internet to provide robust, high‐speed trading capabilities around the world.

Main Barriers for Financial Trading: Latency Points
Web-based and mobile trading platforms depend heavily on the networks that deliver them to provide a solid end-user experience in remote regions. Along the way, points of latency add up to degrade application performance. Three major factors inherent in the public Internet cause latency on trading application performance.

First, latency increases during each of the multiple round-trips required to complete application functionality. For example, in the US, cross coast can take 80ms and applications in London will see 140ms to San Francisco and nearly 300ms to Hong Kong. It is even worse for mobile, where users in the US connecting via 2G/3G networks can expect round-trip times of approximately 200 milliseconds (and 2% packet loss) when using applications outside of a firm’s LAN. On-demand network acceleration services extend a financial firm’s existing enterprise data centre or WAN to geographically dispersed regions and end users. Such services accelerate content moving from an organisation’s internal LAN or WAN for site-to-site and site-to-user connections when applications and content traverse the public Internet on the way to their final destination.

Second, many financial trading applications are based on TCP, which adds latency to application performance. To achieve application reliability, the original TCP designers sacrificed speed. There have been improvements over the years to the protocol’s implementation, but it still suffers from significant slowdowns as distance between sender and receiver increase. To overcome this, several optimisations can be incorporated, either singularly or combined, including window‐size scaling, delayed acknowledgements, Nagle algorithm, selective acknowledgements, limited and fast retransmits, and many others. The ultimate goal is to “fill the pipe” and send/receive data over sometimes unreliable connections the fastest way possible.

Third, many end users access financial trading applications from mobile devices, hard wired branch offices, and even home offices ― all with consumer grade connectivity. Quite often, connections for these users occur at the edge of network coverage zones.This can add more than one full second of latency.

As a result of these three factors, financial trading applications that normally run extremely fast on LANs, or even on WANs in a firm’s home country, suffer severe performance degradation when traversing the public Internet to globally dispersed clients.

Solution: Accelerate Your Content
A current solution helping overcome latency points is on-demand network acceleration services, which extend a financial firm’s existing enterprise datacentre or WAN to geographically dispersed regions and end users. Such services accelerate content moving from an organisation’s internal LAN or WAN for site-to-site and site-to-user connections when applications and content traverse the public internet on the way to their final destination. Delivered as a managed service by leading next generation content delivery networks(CDNs), on-demand network acceleration enables firms to turn services on without incurring additional capital expenditures.

An example of a leading international investment bank that specialises in online global trading and investment, that has made use of a content delivery network service to its benefit is Saxo Bank. In addition to direct services provided to consumers and businesses, Saxo Bank developed a white‐label solution called SaxoTrader that is used by many global financial institutions.

SaxoTrader enables investors to trade Forex, CFDs, ETFs, Stocks, Futures and (Foreign Exchange) Forex Forwards and Options from one, fully integrated online platform. The platform comes in several forms – a Web‐based application, a mobile application for Apple iOS and Google Android, and a desktop application for Microsoft Windows.

Saxo Bank was experiencing significant institutional demand in China for its SaxoTrader platform. While this was great news for the firm’s expansion plans in Asia, the platform suffered performance degradation when serving trading applications between its Denmark‐based datacenter and the China market.

To address application performance issues in Asia, Saxo Bank investigated local managed hosting services but found them to be either cost‐prohibitive or too country‐specific. By contrast, Saxo Bank performed extensive testing of SaxoTrader Web‐based and Client based applications running on CDNetworks’ DNA (Dynamic Network Acceleration) service. “DNA performed extremely fast without the need for costly data center build‐out,” said Ashley Latham, SVP Trading Products at Saxo Bank. “DNA enables us to pursue multiple world regions in a fast and flexible manner.”

Saxo Bank needed less than two weeks to launch the SaxoTrader platform in China. With DNA virtually eliminating latency, broken trades became a thing of the past, saving Saxo Bank millions of dollars per day from lost trading revenue.

Breaking into Emerging Markets
The critical aspect for business success is to maximise performance of flexible Forex trading applications for retail investors, taking into consideration the growing number of users accessing these from a wide variety of places and devices. DNA enables companies to easily and cost efficiently improve service globally, turning every user and device into a high‐throughput application access point. IT leaders and heads of global Forex trading can quickly and seamlessly adjust their financial application delivery strategies as business needs evolve.