The Toronto Stock Exchange is proposing to launch a new service catering to high-speed traders — a faster co-location network connection.
In a notice outlining the proposal, the TSX Inc. is seeking public comment on the proposed introduction of a new, “ultra-low latency” 10 gigabit co-location option for each of its exchanges that will provide faster access to their trading engines.
It estimates that the new service will speed up order entry by 14 microseconds, and the receipt of market data feeds by one microsecond.
The company said that it’s proposing the new service due to growing demand for super-fast trading, its desire to provide traders with optimal performance, and to “remain globally competitive” with similar offerings from major global rivals, including the NYSE, Nasdaq and the Deutsche Börse.
“While the current connectivity offerings reflect standard offerings within peer exchanges (both in Canada and internationally), there continues to be growing client demand for faster processing of message traffic, and the exchanges aim to continually innovate to improve trading performance and meet the evolving requirements of Canadian capital market participants,” it said.
In the proposal, which is out for comment until Oct. 13, the TMX maintains that the proposed new service will comply with the requirements for fair access and ensuring fair and orderly markets.
“Execution speed and efficiency are important drivers of fair and orderly markets, and the exchanges believe that providing a service that is available to all co-location clients which promotes these drivers will enhance market access and trading operations,” it said.
It estimates that less than half of its existing co-location clients will opt for the voluntary upgrade — and argues that, as a result, the new service won’t become a necessity for all market participants. Traders that don’t adopt it, “can still achieve comparable or even superior latency performance by optimizing the technology architecture within their own co-location cabinet,” it said.