In the Financial Industry, (Microsecond) Timing is Everything
Apr 25, 2016
It is simply a matter of time.
For years, the legacy Network Time Protocol (NTP) utilized to set server clocks has been deemed sufficient enough for financial services’ needs. However, the importance of precise timing in financial applications has been steadily growing for some time, given ever growing message rates, deeper analytic queries, and algorithmic and high frequency trading. Milliseconds are no longer adequate; microsecond-level precision is rapidly becoming the expectation.
In 2014, the EU took steps to institutionalize these expectations, approving regulations known as MiFID II (Markets in Financial Instruments Directive), which govern the way capital markets conduct business. The first MiFID, implemented in 2007, is widely credited with revolutionizing share trading in the EU by creating an entry path for new competitors.
The new rules of engagement housed in MiFID II, slated to take effect in 2017, are even more sweeping. They include the requirement that all data center clocks be synchronized within 100 microseconds of Coordinated Universal Time (UTC) for the purpose of accurately time-stamping transactions. U.S. authorities have yet to issue a similar mandate, but it’s reasonable to expect such requirements to emerge over the next 6-12 months with an implementation soon thereafter. The problem, however, is that NTP is not built for the level of accuracy required by MiFID II.
An alternative approach, Precise Timing Protocol (PTP), receives the official time from an appointed “grandmaster clock” then distributes it consistently across all infrastructures, including the network, servers and storage with a significantly greater degree of precision. PTP (also known as IEEE 1588) achieves this by resolving variations in queuing time in switches and routers. Its implementation can be more involved, but given the trend in regulatory requirements, the benefits may well justify the extra effort.
There is a second related issue, however. The longstanding GPS-based approach to setting a UTC relies on signals originating from deep space satellites. Unfortunately, these delicate signals are vulnerable to jamming, whether unintentional (think of satellite TV reception during bad weather) or intentional - hence the interest shown by the Department of Homeland Security (DHS) in establishing a complementary service to GPS.
A radio navigation network called Loran (Long Range Navigation) was decommissioned in 2010, leaving GPS as the only means of providing critical ship and aircraft positioning data , which was the original purpose of GPS before it spawned countless commercial applications. An updated version called eLoran was slated to take Loran’s place, but since 2010 has failed to receive the necessary federal budget funding.
The key to Loran is that it’s ground-based, rather than space-based. Consequently, it generates a far stronger signal, one capable of penetrating ground barriers - a particularly useful feature for first responder scenarios. eLoran is interoperable with and independent of GPS, according to an Institute for Defense Analyses report, positioning it as a logical alterative to GPS. Given the mission critical role played by GPS in financial services, as well as defense applications, addressing the vulnerabilities of GPS belongs high on any policy to-do list.
We see it as Juniper’s role to remain at the vanguard of such issues and capabilities, alerting our clients to important technology alternatives, anticipating shifts in the financial services industry landscape, and standing ready to implement these new solutions when our clients deem it appropriate.
That’s why we are excited and proud to be partnering with the DHS in educating the financial services community about the issues surrounding secure timing, the available alternatives to our current approach, and likely shifts in the regulatory environment. On April 19, Juniper and the DHS hosted complimentary seminar on Secure Timing Alternatives at the New York Stock Exchange. This three hour morning session included a demo of eLoran, as well as a visit to the NSYE trading floor for the opening bell ceremony.
Given the expanding need for precision timing within the Financial industry, the requirements for vendors to provide reliable and secure time from authoritative reference to end server is mandatory.
In the meantime, we’ll continue to work to ensure that our products deliver upon our customers’ secure timing needs, which ensures that the time is not altered from the GPS to the server. For example, Juniper’s MX family of routers is already capable of leveraging PTP, as well as our newer QFX switching family.
As Secure Timing continues to evolve, and new standards and protocols are introduced, Juniper plans to remain at the forefront. We’ll continue to work with our financial services customers, providing them with the knowledge and tools they need to time transactions right down to the microsecond.