Deutsche Börse is making further technical improvements to Xetra trading. The measures are aimed at algorithmic trading, where computers evaluate trading signals and place buy and sell orders in the system. These adjustments will allow Deutsche Börse to reduce the access times by more than 50 percent from April onwards. The improvements cover measures in the participant network, higher-performance hardware and new software functionalities. The total investment required for the improvements to the highly scalable Xetra system amount to only €8 million.
From April onwards, Deutsche Börse will be offering Xetra participants considerably higher bandwidths of up to 1 Gbit/s (currently 512 Kbit/s). Furthermore, it will be providing its clients with all order book updates up to market depth 10 and the entire price chain in real time and on an unnetted basis for the first time. Xetra participants can then configure the delivery of the order book data they wish to receive themselves, giving them even more scope to tailor the service to suit their needs. Furthermore, the “memory-based matching” function will mean that part of the data required in order to process an order will be made available in RAM, instead of on the Xetra-system hard drive, as at present. This will speed up the order processing time.
Algorithmic trading relies on extremely short round trip times. This refers to the time required for an order to travel from the client system, across the network to the Xetra backend and for confirmation of the order to be sent back to the client. The average round trip time has been reduced by a factor of 3 since December 2006. The peak round trip time is now slightly more than 20 milliseconds. This improvement was achieved by means of a bundle of measures, such as the bandwidth upgrade from 128 KBit/s to 512 KBit/s. From April onwards round trip times of the fastest orders will be reduced to below 10 milliseconds.
Deutsche Börse also offers algorithmic trading clients what are known as proximity services, i.e. the option of installing their trading systems close to the Xetra infrastructure. This results in a further reduction of the round trip times.
Algorithmic trading boosts liquidity and leads to closer spreads for the securities traded, which benefits all market participants.
“Both the completed and the planned measures will boost liquidity, making the Xetra trading platform more attractive for all market participants”, said Rainer Riess, Managing Director for Stock Market Business Development at Deutsche Börse.
“We are setting standards for low-delay access to trading platforms”, said Michael Kuhn, CIO of Deutsche Börse.
