A matter of time: New deal between National Physical Laboratory and Intercontinental Exchange in the high-frequency traders' battle for punctuality

 
Jasper Jolly
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Milliseconds can determine huge profits for high-frequency traders (Source: Getty)

High-frequency traders looking for an edge in the battle to be first into a trade have invested in a new link to the UK’s most reliable clock.

The Basildon data centre of US-based Intercontinental Exchange (ICE) will have the most accurate time possible piped from the UK’s National Physical Laboratory (NPL), which sets the UK’s standard for all clocks.

The fibre link provides a time signal at the speed of light which is then adjusted to take into account the length of the cable, with an error of only one second every 158 million years.

Read more: This is why high-frequency traders need to trust their gut instincts

The NPL’s Teddington centre already links to other data centres in Slough, Docklands and even Brick Lane, run by ICE rivals like Equinix, Telehouse North and Interxion.

Under the MiFID II regulatory regime traders have to show their transactions can be traced and stamped with the exact time they happened so they can be easily audited.

High-frequency traders have become the object of closer regulatory scrutiny as "flash crashes", when a market will plunge dramatically in a matter of seconds, become more common. Those firms make up 27 per cent of the UK’s trading volume, according to City regulators at the Financial Conduct Authority (FCA), with thousands of trades made within milliseconds.

Most companies currently take their time from GPS satellite, but some traders fear the signals are vulnerable to disruption.

Read more: Regulators approve crackdown on high-frequency trading

Dr Leon Lobo, who works on business development for NPL, said: “The current solutions that are primarily used are very vulnerable to interferences, whether malicious or inadvertent.”

Although likely of questionable legality, cheap GPS jammers are used by some people to block vehicle tracking, meaning companies reliant on the time signal could be hit by temporary time black-outs.

The ease of blocking GPS has also opened the possibility of “spoofing” signals to throw trading firms off deliberately.

While fibre connections are also vulnerable to other forms of disruption, including physical damage, they are less susceptible to radio interference.

Read more: Doh!: Out-of-depth traders among reasons for flash crash's steep drop

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