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IF ONLY WE ALL HAD MORE TIME AND MONEY – LEARN HOW HFT ACHIEVES BOTH…

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IF ONLY WE ALL HAD MORE TIME AND MONEY – LEARN HOW HFT ACHIEVES BOTH… 1

Gareth Richardson, Managing Director, Custom Connect UK

In time sensitive sectors such as Ultra Low Latency Direct Market Access (ULLDMA), autonomous market-making, algorithmic trading and High Frequency Trading (HFT), transactional speed directly relates to potential profit.

Custom Connect

Custom Connect

Technological advancements and changes to financial regulation have resulted in the evolution and deployment of ever more complex trading strategies, designed to mitigate trading risk whilst maximising profit in as short a time as possible. For example, HFT strategies often include multiple asset classes across multiple exchanges.

The short and long-haul connectivity infrastructure that interconnects this latency sensitive community to different co-location centres plays a pivotal role in the stability and continued success of a winning trading strategy. HFTs invest heavily in performance technology infrastructure. After all, if you can conduct successful trades faster than your competitors then you can ensure a stronger competitive advantage, a more effective strategy and higher returns.

So what should trading houses be looking for when it concerns telecommunications? There are three aspects to consider:

  • Ultra-low latency between every corporate site, data centre, local exchange and partner organisation
  • High performance networking that can cope with mission critical systems and scale in line with market growth
  • Vendor-agnosticism so your objectives are number one, not the profits of others

To begin with, the focus should be around choosing the right solution for each requirement, as no two trading strategies are the same. Not all strategies are ultra-low latency dependent, however for ones that are the days of measuring trades in seconds / milliseconds have long passed. In today’s global arena, financial markets now run at lightning speed. Market leaders measure time in nanoseconds and in some cases, picoseconds. Obviously, this desire for speed requires an appropriate infrastructural base.

Eradicating Delays

The challenge lies in choosing and designing a balanced and appropriate latency profile for each connection and strategy. Latency reduction costs money and with current technology options, costs can easily become prohibitive if they are not balanced against potential gains. Sourcing a chosen solution can be complex and challenging. In today’s climate even HFTs look to rationalise cost.

In this highly competitive arena, firms are now looking to ever more exotic locations to realise their advantage. This is particularly challenging for network sourcing and support departments. For example, emerging economies are a particular issue. They might offer the biggest revenue opportunities, but having constantly up-to-date information about the fastest and most reliable carrier connections in Moscow, Sao Paulo and Seoul, when traditionally internal infrastructure teams have been used to sourcing for New York, Frankfurt and Tokyo, can be difficult from an implementation, technological and cost perspective.

Ultimately firms need to select the most effective connectivity and partner for their objectives. For some this will be an intelligent IP network; a standard perfect for large organisations with known performance requirements; for others, a dark fibre network with its flexibility, its upgradeability to meet local growth demands and strong, regulatory compliant security.

An equally popular choice is Ethernet. When performance requirements are high, point-to-point Ethernet connectivity is the standard choice – guaranteed latency across the entire corporate network; strong service level agreements (SLAs); efficiency regardless of existing IT applications (video, audio, trading systems, virtualisation, cloud connectivity), visibility and scalability and finally, the cost of local area networking (LAN) in the form of global wide area networking (WAN).

For HFT companies, this in particular is a greatly needed attribute. There is little point in having the lowest latency in the market if a telecommunications infrastructure has not been effectively designed or lacks intelligence and management control measures. A lack of local knowledge could result in a poor choice and unreliable connections that suffer from latency fluctuations. The major challenge in this scenario is gaining and maintaining continued knowledge of the global carrier market.

Looking To The Skies

That said, the above only occurs if you choose a provider that has limited options or is compromised through not affording a balanced and agnostic view of the market. Undeniably, the marketplace is congested and if we consider how much a global implementation can cost, especially if it does not deliver on its promises, it becomes apparent how important it is for trading companies to be equipped with the right knowledge to make an informed decision.

This comes in the form of a provider that understands the market, its intricacies and its challenges. Look for a provider that wants to help you meet your trading objectives. Turnkey networks are inadequate for HFT – the network you receive should be custom-built with your specific requirements in mind.

This is achieved through a vendor agnostic approach. A provider with strong relationships, knowledge of the carrier landscape, an understanding of the entire trading spectrum (data centre connectivity and local access is as important as overall connectivity) and a customer service driven ethos will without doubt offer more value and support than the cheapest network vendor. Vendor neutrality is critical in this sector and searching for a partner that promises that will produce excellent results.

A great example of this is the development of new connectivity options built around HFT such as point-to-point microwave transmission. For firms that wish to invest in the lowest latency connections for a specific use-case, microwave could be the perfect choice, subject to a winning strategy. Offering a ~40% reduction in latency when compared to a similar fibre route, it promises a direct link without the slow-down associated with ground based communications.

Implementing a microwave connection would not be possible with a standard provider, especially one that does not specialise in the sector. Just like with trading, knowledge is key, the ability to act quickly is pivotal, neutrality pays, and bespoke solutions deliver the competitive advantage to win.

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Oil extends losses as Texas prepares to ramp up output after freeze

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Oil extends losses as Texas prepares to ramp up output after freeze 2

By Devika Krishna Kumar

NEW YORK (Reuters) – Oil prices fell for a second day on Friday, retreating further from recent highs, as Texas energy companies began preparations to restart oil and gas fields shuttered by freezing weather and power outages.

Brent crude futures ended the session down $1.02, or 1.6%, at $62.91 a barrel while U.S. West Texas Intermediate (WTI) crude fell $1.28, or 2.1%, to settle at $59.24.

For the week, Brent gained about 0.5% while WTI fell about 0.7%.

This week, both benchmarks had climbed to the highest in more than a year.

“Price pullback thus far appears corrective and is slight within the context of this month’s major upside price acceleration,” said Jim Ritterbusch, president of Ritterbusch and Associates.

Unusually cold weather in Texas and the Plains states curtailed up to 4 million barrels per day (bpd) of crude production and 21 billion cubic feet of natural gas, analysts estimated.

U.S. energy firms this week cut the number of oil rigs operating for the first time since November, according to Baker Hughes data.

Texas refiners halted about a fifth of the nation’s oil processing amid power outages and severe cold.

Companies were expected to prepare for production restarts on Friday as electric power and water services slowly resume, sources said.

“While much of the selling relates to a gradual resumption of power in the Gulf coast region ahead of a significant temperature warmup, the magnitude of this week’s loss of supply may require further discounting given much uncertainty regarding the extent and possible duration of lost output,” Ritterbusch said.

Oil prices fell despite a surprise drop in U.S. crude stockpiles last week, before the big freeze hit. Inventories fell 7.3 million barrels to 461.8 million barrels, their lowest since March, the Energy Information Administration reported on Thursday. [EIA/S]

“Vaccines and the impressive rollouts we’ve seen have delivered strong gains, as have the efforts of OPEC+ – Saudi Arabia, in particular – and the big freeze in Texas, which gave oil prices one final kick this week,” Craig Erlam, senior market analyst at OANDA, said.

“With so many bullish factors now priced in, it seems we’re seeing some of these positions being unwound.”

The United States on Thursday said it was ready to talk to Iran about returning to a 2015 agreement that aimed to prevent Tehran from acquiring nuclear weapons. Still, analysts did not expect near-term reversal of sanctions on Iran that were imposed by the previous U.S. administration.

“This breakthrough increases the probability that we may see Iran returning to the oil market soon, although there is much to be discussed and a new deal will not be a carbon-copy of the 2015 nuclear deal,” said StoneX analyst Kevin Solomon.

(Additional reporting by Ahmad Ghaddar in London and Roslan Khasawneh in Singapore and Sonali Paul in Melbourne; Editing by Marguerita Choy, David Gregorio and Nick Macfie)

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FTSE 100 ends higher on improving economic activity; gains for the third week

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FTSE 100 ends higher on improving economic activity; gains for the third week 3

By Shivani Kumaresan, Amal S and Shashank Nayar

(Reuters) – London’s FTSE 100 ended higher on Friday after the economy showed signs of improvement this month and was set to gain for the third consecutive week as investors bet that vaccine rollouts would spur economic growth.

British firms fared less badly during February’s lockdown than feared and are upbeat about the prospects for growth later in 2021 when they hope the roll-out of vaccines will allow a major relaxation of COVID-19 restrictions, a survey showed.

The blue-chip FTSE 100 index ended 0.1% higher with miners and banking stocks gaining the most, while the mid-cap index gained 0.5%.

“There is optimism and hope that the vaccine rollouts will eventually help the economy improve while the market is awaiting the government’s lcokdown easing plans to be revealed next week,” said Keith Temperton, an equity sales trader at Forte Securities.

However, data on Friday showed British retail sales tumbled much more than expected in January as non-essential shops went back into coronavirus lockdowns.

The FTSE 100 has recovered nearly 35% from its March 2020 lows and is nearly 13% away from its highest level last year as record stimulus measures and massive vaccine rollouts helped improve investor confidence.

NatWest gained 5.2% and was the third biggest gainer on the FTSE 100 index after it said it would wind down its Irish arm Ulster Bank, as Chief Executive Alison Rose continues to slash away at underperforming parts of the state-owned lender after it swung to a loss in 2020.

Segro Plc rose 1.5% after the real estate investment trust reported a near 11% jump in annual profit for 2020.

Banking group TBC Bank fell 6.1% after a slump in annual underlying profit due to lower interest rates and limited lending growth in the fourth quarter from the COVID-19 pandemic.

 

(Reporting by Shivani Kumaresan and Amal S in Bengaluru; Editing by Vinay Dwivedi, Krishna Chandra Eluri and Jonathan Oatis)

 

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UK bond yields head for biggest weekly rise since June

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UK bond yields head for biggest weekly rise since June 4

LONDON (Reuters) – British government bond prices fell again on Friday as a global debt sell-off continued on expectations of hefty U.S. fiscal stimulus, putting gilt yields on course for their biggest weekly rise since June.

The spread between yields on British 10-year debt and its German equivalent widened to 100 basis points for the first time since March, partly reflecting the faster roll-out of COVID vaccines in Britain which has lifted some of the country’s economic gloom.

Ten-year gilt yields peaked at 0.693% at 1429 GMT, their highest since March 20 during the so-called “dash for cash” at the onset of the pandemic.

Based their latest level they are on course of just under 17 basis points the biggest since the week to June 5.

Sterling also rose above $1.40 for the first time in nearly three years on Friday although it was flat against the euro.

Gilt yields surged at the start of the COVID pandemic due to a scramble for U.S. dollar assets, until the Bank of England calmed markets by restarting its bond purchase programme.

If yields stay where they are, February will see the biggest increase in 10-year gilt yields since October 2016, when markets judged Britain’s referendum vote to leave the EU was having less of an immediate impact on the economy than first thought.

(Reporting by David Milliken; Editing by William Schomberg)

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