Trading Faster with Market Maker Direct

Stock ticker

Image via Wikipedia

With so many events happening, whether it is a system upgrade, rule changes or a new product coming to market, we do not always take a moment to celebrate our successes. Will you allow me to tell you about our latest success in the option world?

At NYSE Arca and Amex Options, we recently completed an important upgrade to our quoting application, Market Maker Direct (MMD). MMD is the application that our Market Makers use to stream quotes into both exchanges. The faster the throughput (how fast quotes make it into the market) and the faster the “ack’ times (acknowledgement that quotes were received) is of huge importance. The fastest quotes i.e. the system with the lowest latency wins.

In our business, speed counts. What was first measured in seconds then milliseconds now is measured in microseconds.

In options, we do not just have one market per stock as the stock market. Each underlying has numerous listed option series or strikes, on differing months, and each individual strike for each month has a call market and a put market. So some symbols-- think SPY, Apple or Google—have several hundred series which mean hundreds and hundreds of markets that need to be processed, for just that one underlying security, ETF, or index. With this crush of data growing ever larger and the demand for lower latency measured in ever finer granularity, we realized the necessity to stay ahead of the game and upgrade MMD.

Our Head of US Options Business Technology, the head of U.S. Development, and our lead Developer for Options devised the GroupID for MMD. With GroupID, we could split the processing of quotes into multiple threads per symbol, keeping us at the forefront of speed with lower latencies.

Let me let you in on a secret. Software and hardware upgrades are always harder and take more time than you plan for. Now keep that just between you and me. Never do the developers and QA testers come back and say, “This is easier than we thought, it will take less time than expected.” Of course they might say that if they weren't absolutely committed to delivering optimal results. Luckily they are obsessed with finding the best solution!

We geared up for an upgrade to our Market Maker Direct. This involved numerous test days on Saturdays with many unsung heroes at the exchange and on the client side. It involved Market Makers having to be recertified on MMD. We had a two stage rollout. First, market makers had to consume the new GroupID fields as part of their daily “series download.” Second phase was actually sending in quotes by GroupID. Our expectation was by midsummer we would be done. So we were a little optimistic but we completed the whole rollout and implementation by mid fall! All together now… “Go Team!”

How do you know that the upgrade was successful? Firstly, client feedback has been gratifying to say the least. Secondly, we had clients ask for GroupIDs in even more symbols.

This is a true story. After we had finished the full rollout and implementation of the GroupID, one of our hard working market makers sends us an email: the new upgrade is great. They really see an improvement in quote and “ack” times, and “could you please assign multiple GroupIDs to these additional underlying symbols?”

Such a successful upgrade, people are clamoring for it on more symbols which of course we are happy to oblige.

After the upgrade, our speed gains were incredible. Our average mean “Ack” time decreased by 20%. What was once over 500 microseconds is now consistently around 400 microseconds now. Even better, the outlier quotes…those in the slowest one percent went from around 2 milliseconds to under 1 millisecond.  We decreased the latency time by over 50%.

We have world class technology but we are not sitting around enjoying it. We are continually making it better.

Trade ‘em up!

Enhanced by Zemanta