TRADING: FPGAs FPGAs have driven tick to trade, but is speed always the most important benchmark in investing? Ashok Kalyanswamy of online trading and investment specialist Saxo Bank, and Milan Dvorak, Founder of Netcope Technologies, now Magmio, agree to differ They’re used by physicists at CERN to pick up instabilities in the Large Hadron Collider particle beam; they could help a fibre-optic camera process multispectral images of arteries fast enough to be useful to heart surgeons; and they can eliminate the infinitesimal time delay experienced by scientists trying to study the beat of a fly’s wing. ‘They’ are field programmable gate arrays (FPGAs) – logic elements on a chip that can be configured and reconfigured for tasks whose success depends on eliminating the temporal time jitters seen with conventional computing. In the financial world, they are most commonly associated with ultra-low latency investment transactions, the ‘tick to trade’ metric that determines success in high-frequency environments. But that’s not their only application. While in prop trading, using FPGA technology undoubtedly accelerates the race to zero latency, Milan Dvorak, founder of Netcope Technologies, which now provides FPGA services to the investment industry under the Magmio
brand, suggests that banks, brokers and other institutions could also find value applying them as risk gateways or market data processing gateways, especially in periods of high volatility. And everyone is now familiar with those. “During COVID, many of these institutions ran into performance limitations other than latency, just dealing with the sheer amount of data,” he says. “And that’s another area where FPGAs can help.” Ashok Kalyanswamy, chief information officer at online trading and investment specialist Saxo Bank, had previous experience of incorporating the hardware at a broker house that co-located FPGAs at exchanges. While hugely expensive at the time, it did put a market-beating distance between the company and its rivals because it was able to accelerate the last mile in the trading process. But he says that you have to be discerning about where you apply the technology. And, as a retail-focussed investment bank, facilitating other people’s trades, Saxo hasn’t yet seen a compelling reason for using FPGAs. “You have to think about what you are striving for,” says Kalyanswamy. “If ultra-low latency is key to your strategy, you co-locate as close to the exchanges as possible and you can get raw market data and trade directly; if you have a proprietary algorithm and you’re trying to achieve ultra-low latency, then absolutely, [FPGAs are useful]. However, if you are catering for a retail investor who’s in Australia, trading with a broker on Nasdaq, it doesn’t really make sense just to optimise the last mile, because it’s many hops from the person making the decision to trade, and the order hitting the market.
If you are sitting in the UK, and you’re trying to trade on the Japanese market, is it going to make a nanosecond latency difference? Not really. By the time you hit the button on your app or desktop and it travels first to your broker and then to the market, those latencies are bigger than the last mile in the FPGA. “When you talk about ultra-low latency trading, to optimise the hardware, co-locating the decision-making, your algorithms and your strategies are as important as the connectivity part. You have to think, end-to-end, who is making the decision to hit the button to trade. ”In Saxo Bank’s case, we are a global facilitator in trading and investment, connected to 88 markets around the globe in 25-plus countries. We always try to get the best price for the customer, react to customers’ orders and what they are trying to achieve, as quickly as possible. ”But we look at the whole value chain: from different end points around the world, the network we connect to, the latency we have in our infrastructure throughout. We have a more of a systems-approach to latency and making sure there are no inefficiencies in our pipeline to the market, as opposed to optimising the last mile.” For the majority of Dvorak’s clients, though, that last sprint is all-important. “We basically create a tailored solution to a very specific use case and, in trading, the use case is usually ultra-low latency,” he says. “So, there is no operating system, there is no overhead, FPGAs are just pure logic, programmed to do one thing, and that’s trading. That’s why this technology can achieve great performance and
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