By Richard Hoptroff, CTO and Founder of Hoptroff
When the time and date of a particular event has been recorded either digitally or manually, we would say that the event has been timestamped. From social media posts to high-frequency trading, time stamping in the digital era is everywhere, and is used to validate actions from a particular event.
Timestamping allows organisations to keep track of events that take place at a particular moment. Knowing what happened at an exact point gives the user of the information control, and more definitive direction on how to tackle situations of the event that happened in that specific time-period.
For example, an organisation digitally signs an agreement with another party. Later down the line, the agreement is broken. This could be caused by a number of reasons, one of these being slippage in the price of the deal before the agreement was completed. The party in question are claiming they had the right to the action that broke the agreement as it happened before the deal was completed. The digital timestamp from the contract could tell you exactly when the contract was signed and whether the action happened before or after this moment. This accuracy is extremely useful in any settlement and the more precise the timestamp can be, the less confusion and ambiguity is caused.
Timestamping in Financial Services
In the finance sector, high-frequency traders and other fast-paced occupations require microsecond speeds that are consistent throughout their network. Therefore, having a resilient, traceable, and most importantly, accurate timing infrastructure is becoming more important as we move towards cloud-based networks.
In this industry incorrect timestamps can result in cancelled transactions, which can be costly to finance firms across the world. To mitigate this risk, Markets in Financial Instruments Directive II (MiFID II) in Europe and the Consolidated Audit Trail (CAT) regulations in the USA have sought to ensure business clocks are synchronised and accurate to within 100 microseconds of UTC, respectively.
From a global exchange perspective, billions of trades are processed every year. This means a vast amount of data hitting the exchange every second. Furthermore, thousands of commands are being processed at the same time, whether that is to cancel, buy or sell. Regulation of these actions helps with disputes against organisations. By complying with these regulations, firms avoid any unnecessary bad reputation and soured relationships with clients. It is likely the most common problem for firms is the traceability and monitoring of such high frequency. Not being able to trace the events to their exact moment of execution could easily affect their reputation.
While these regulations have brought consistency and order to financial services transactions, it has also put the responsibility on firms to find and implement a compliant solution. Particularly for SMEs, it can be expensive and labour intensive to roll out a timing solution. Ideally, timestamping should be a cheap, secure, and verifiable public resource that is in alignment with current regulations.
The Importance of Verification
One development of timestamping in the digital age is the digital hash ledger. These clever time stamps use a piece of information from the last event, known as a ‘hash’, to chronologically organise exactly how events happened without being tampered or changed by external parties. These timestamps could avoid current systems being left vulnerable through delays. Such delays would cause the event being stamped to appear out of sequence, providing a misleading causal trail of events. Ultimately, data cannot be used to justify a particular event, but by providing an accurate and traceable timestamp, users can verify the timing of an event and create an authoritative and certifiable timestamp.
Timestamping will also enable authorities to prove their records are correct. By using a timing solution that is traceable back to a stratum0 source of UTC, each event can be audited and validated. This technology therefore has the potential to help resolve disputes, even in a court of law, by proving the exact timing of an event.
The precision and accuracy of timestamping has never been so important. In financial services, where tiny fractions of a second matter, regulators have stepped in to ensure transactions run smoothly and without confusion. This helps both individuals and organisations in clearing up exact timings so that the transfer of the correct sum is delivered to the right place at the right time.
Utilising Innovative Solutions
There are many legacy hardware solutions that large corporations are still using to this day. Despite their accuracy, these cumbersome solutions are hugely expensive to build and maintain, not to mention the hassle and time it takes to build a new timing infrastructure at every data centre. In this digital era, network-based solutions are reliable and easy to scale, with data stored in the cloud rather than in-house data centres. In addition to this, network-based solutions are only a fraction of the price of hardware, and do not require additional overhead costs. By switching to network-based solutions, organisations free up time and resources to use efficiently elsewhere.
Another vital consideration when choosing a timing solution is resilience. When space weather, jamming and spoofing, and satellite outages are on the rise it is increasingly risky to rely, as most solutions do, solely on one satellite time source. Modern solutions have integrated multiple satellites and terrestrial feeds to guarantee secure, consistent, and highly accurate time.
Finding a time solution that is accurate, resilient, and simple to implement is challenging. End-to-end solutions for your timing infrastructure require lots of time and effort to build and maintain. Using network-derived Traceable Time as a Service (TTaaS®) solutions would deliver precise, reliable, and digitally coded time which can help keep up with the pace of trading, as well as modern day technology.
In most financial systems, the central hub determines the moment an event officially arrives, and as terrestrial technology matures, demand for cheaper, reliable, and traceable alternatives will increase. Moving towards cloud-based technology has become the norm for most infrastructure, and timing solutions are to follow suit. Organisations must evolve their timing structure to keep up with a world that is increasingly reliant on digital solutions, as well as having the ability to compete with other companies that are already innovating.