What’s the fastest way to get from Point A to Point B? Essentially, you have two options: increase your speed or find a shortcut. But suppose you’ve reached the limits at of how quickly you can move; the only remaining strategy is to focus on improving the efficiency of your journey. 

In our information economy, there is a hard limit.  299,792,458 m/s, to be exact.  

In other words, the speed of light. That may sound as good as instantaneous, and in most cases it is. But the ultracompetitive world of high-frequency trading, the fundamental constants of nature have practical implications. As sociologist Donald MacKenzie points out, “in a nanosecond, the fastest possible signal – light in free space – travels just thirty centimetres, or roughly a foot”.  

A couple of nanoseconds’ delay in electronic signals whizzing around the world are imperceivable to human brains; they may mean the difference between profit and loss when it’s two computers talking to each other through complex algorithms. As a result, HFT firms aren’t just moving their systems closer and closer to exchanges, they’re updating the mechanism through which they transmit signals.  

Fibreoptics was once seen as a symbol for the communication age. MacKenzie explains that signals are slowed down by the materials used to make fibreoptic cables, “to around two-thirds of its speed in free space”. HFT companies are therefore switching to microwaves, which “travel through the atmosphere at nearly full light speed”. Close to the limit, in other words. 

High-frequency trading is a niche approach and not equally suitable for all financial instruments. (See MacKenzie, Material Signals: A Historical Sociology of High-Frequency Trading (2018) for an overview of why HFT is not prevalent in futures, benchmark bonds and forex trading.) 

Who needs speed? 

But speed matters, regardless of your trading strategy—albeit not always to the nanosecond. And if you’re in the business of enabling clients to trade, speed becomes both an ethical and a compliance imperative. In other words, liquidity providers have a professional obligation to get their tech up to standard. 

It comes down to best execution requirements. When clients place a trade, best practice dictates that you execute the trade in a suitably timely manner.  

The UK Financial Conduct Authority is explicit about this (and hardly alone among global regulators): “the execution factors to be taken into account are price, costs, speed, likelihood of execution and settlement, size, nature or any other consideration relevant to the execution of an order.”  

Providing reasonable speed of execution, while one of several factors to consider, is thus a compliance non-negotiable.  It’s easy enough to see why. With the market moving at the speed of light, any delay in executing an order can result in slippage – the difference between the price at which the order was placed and the price at which it’s executed. 

Failing to secure the right price for clients is also bad business practice. Who wants to trade with a provider that can’t deliver the price on the tin? 

For top liquidity providers, ensuring fast execution comes with its own set of complexities. HFTs focus on delivering their instructions to servers with maximum speed. For liquidity providers, the challenge extends beyond raw signal speed to include processing orders at scale and offering global liquidity across a wide range of assets to clients worldwide. 

In other words, speed of execution is not just about how quickly you can move data, though that’s critical. You also need to design your systems to avoid bottlenecks, ensure you can manage inflows, and prevent server downtime and glitches – among a myriad of other considerations. 

Clients also expect rich, up-to-date data that accurately reflects rapidly changing market conditions. There’s no value in delivering data – even the highest quality data – if it arrives even moments too late to be useful. 

Then there’s the human element. An effective risk and liquidity strategy also means carefully considering real world events and taking proactive measures to anticipate periods of increased volatility.  

The integrated advantage 

With these complexities in mind, how does Finalto deliver the best possible results for clients when executing orders? 

Our Risk and Liquidity teams work tirelessly to optimise client’s trading environment, mitigate foreseeable risk, and develop robust systems and strategies to anticipate unforeseeable shifts in market conditions.  

There is also a dedicated Client Services team to ensure that each client receives the service and support they need to meet their objectives. 

Then, crucially, there’s the technology edge – a full department of technology specialists who build and refine Finalto’s proprietary technology. 

Each plays an indispensable role in the company’s overall services offering. Arguably, though, the Finalto secret sauce is not simply the depth of talent and the cross-disciplinary experience. It’s how our departments work together to assess client needs and continually optimise Finalto’s technology and service offering. 

The whole is more than the sum of its (very sophisticated) parts. 

Want to learn more about how our integrated offering puts global markets at your fingertips? Get in touch with Finalto to chat about award-winning service and solutions that let you focus on growing your business at the speed of light. 

All opinions, news, research, analysis, prices or other information is provided as general market commentary and not as investment advice and all potential results discussed are not guaranteed to be achieved. The information may have been derived from publicly available sources, company reports, personal research, or surveys. Past performance is not indicative of future performance. Trading carries risk of capital loss. Service available to professional clients only.