THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
Contents Abstract ........................................................................................................................................ 2 Powering the Financial Services Market ............................................................................ 3 Carrying Financial Data on a Fiber Super Highway .......................................................... 3 Bandwidth .................................................................................................................................... 3 Low Latency ................................................................................................................................ 4 Provisioning Time........................................................................................................................ 4 Additional Key Purchasing Criteria ....................................................................................... 4 The Network Ups and Downs of Fiber Management ........................................................ 5 Optical Transport Service ........................................................................................................ 5 Dark Fiber ..................................................................................................................................... 5 Bridging the Benefits Gap Between Two Popular Approaches .................................... 6 Evolving Networks for the Future ......................................................................................... 7 Lightpath is positioned to Meet Your Needs .................................................................... 8
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
ABSTRACT The role of the communications service provider (CSP) in the high-stakes, high-speed, financial services markets has grown in prominence in recent years. As the networks that carry the world’s financial data have evolved into blazing fast, flexible and customizable fiber super highways, speed has emerged as a primary differentiator for the banks, hedge funds and advanced trading firms that operate in this highly-competitive space. But in such a complex market, speed is only one piece of the equation when considering what is required from CSPs to meet the current and future needs of the financial services sector. Route diversity, network bandwidth and reliability, and provisioning time are all extremely important factors. And a CSP’s ability to offer the visibility, control and capacity the market demands to deliver the financial data network of tomorrow is a crucial factor in ongoing growth and success. This white paper draws on Lightpath’s extensive experience serving the financial services market and independent research conducted in 2010 to offer a service provider view of the constantly evolving telecommunications needs and demands of the finance market. It explores how financial organizations select a CSP today, how they’re driving network innovation and provides a preview of the intelligent financial data network of tomorrow. Lightpath Low Latency Optical Transport services are designed to give your business the shortest routes between major exchange locations to facilitate point-to-point transmission of your businesses’ low latency applications. Each customized route is continuously supervised by Lightpath’s cutting-edge Network Monitoring Center and backed by our award winning customer support.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
POWERING THE FINANCIAL SERVICES MARKET It is no secret that information technology has forever transformed how the global financial markets operate. Over the course of decades, the market has evolved from high-powered traders in suits waving pieces of paper to an environment where complex computer algorithms and the ability to execute trades in a matter of microseconds can equal a loss or gain of millions and dictate whether a firm will be successful or left in the dust. Sitting behind these trading algorithms are fast, flexible fiber networks that carry extremely time-sensitive financial data around and between the world’s financial hot spots. The CSPs that build these networks know that they’re doing so for some of their most sophisticated customers, both from a purchasing and use perspective. As a result, a considerable amount of research, capital expenditure and product innovation ahead of market need is required to be successful in serving the financial services sector. Success also requires an acute understanding of where financial firms are today and where they want to go tomorrow.
CARRYING FINANCIAL DATA ON A FIBER SUPER HIGHWAY Telecommunications networks for financial services are essentially a series of super highways that connect the physical locations that are most important to the sector. Today, in the New York metropolitan area, there are about 30 such locations. These include exchanges like NASDAQ and NYSE, important NJ-based data centers and collocation facilities, southern Connecticut where there is a high concentration of hedge funds and more. Essentially, CSPs must look at this network as 30 interconnected locations that form the nerve center of the financial services market in the region. To be clear, this data does not travel over the “common carrier infrastructure,” that carries most of the business world’s data. These private super highways have been meticulously architected to deliver the lowest latency, highest bandwidth, fastest provisioning time and maximum reliability available. These network qualities, among others, were cited as most important by financial firms in recent independent research conducted by Lightpath to better understand current market needs and drivers.
BANDWIDTH Financial firms of all sizes want to be able to pump an unlimited number of trades through their network at any given time and traffic delays caused by bandwidth bottlenecks are absolutely not an option. As a result, the data super-highways that are being build between the 30 most important locations must be able to handle a massive amount of traffic under any condition which, in financial services, can often include short bursts of very high traffic. This requires significant bandwidth availability. Picture a highway with 16 lanes on each side, making traffic and speed impediments a virtual non-issue. CSPs are meeting this need with optical transport services. Today, while 1 gigabit and 10 gigabit connections remain most popular, CSPs have prepared their network to offer 40 gigabit service in response to imminent customer demand. 2011 is likely to be the year that the cost efficiencies of 40 gigabit services finally lead to adoption. After that, it won’t be long until 100 gigabit services are brought to market.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
LOW LATENCY Latency refers to the amount of time it takes for data to travel from one network location to another. Though low latency has emerged largely as table stakes when delivering telecommunications services to the financial market, its importance cannot be understated. The lowest latencies can be achieved by establishing the shortest possible distance between two locations. This is not always easy to do as CSP access rights will often dictate where a provider can lay fiber. This fiber path build process has emerged as both an art and a science as providers scramble to light new locations and find the most direct routes back to key hotspots. Another factor that contributes to latency is the amount of equipment that sits in between locations to process or monitor data speeds. Think of this equipment as express toll booths that might force cars traveling at 100 mph to slow down, if only for a moment, leading to lost travel time. A primary rule in driving the lowest latencies is to only put vital networking equipment on these routes. Low latency routes around the New York metro area are now down to the hundreds of microseconds, with reductions of a few microseconds and even nanoseconds making a big financial difference to traders. Carrying data out of this area to key financial hubs in Chicago and Toronto, for instance, results in higher latency figures because of the physical distance of the route – 15 to 20 milliseconds being the gold standard. Finally, network capacity also plays a role in lowering latency. In short, the bigger the pipe, the less likelihood of congestion.
PROVISIONING TIME Provisioning time is how long it takes from the signing of a contract for a new low latency circuit to be installed, tested and turned up by the service provider. In other words, the amount of time that must elapse before a firm can take advantage of a new low latency trading route and the extra profitability it can offer. Provisioning time is in the same class as low latency as a top purchasing criteria. When shopping based on provisioning time, it has become common practice to look at a CSP’s track record in meeting quoted install intervals. For example, a strong installation interval quote for many key New York metro area routes might be 20 days. But if that quote is not backed by outstanding execution in a situation where unexpected problems can arise at street level or with network equipment when commissioning a route, it can quickly lead to lost time and revenue.
ADDITIONAL KEY PURCHASING CRITERIA Additional key purchasing criteria cited by financial services organizations include cost, reliability and having sufficient capital to scale and continue network build-outs ahead of need to meet ongoing demand.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
THE NETWORK UPS AND DOWNS OF FIBER MANAGEMENT When deploying a telecommunications network to carry financial services data, firms have traditionally chosen between two primary approaches: buying a CSP-managed optical transport service (OTS) or managing their own dark fiber that has been purchased or leased. Each of these common approaches carries with it unique benefits and drawbacks. However, a third, emerging approach aims to close the benefit/drawback gap between these OTS and dark fiber solutions.
OPTICAL TRANSPORT SERVICE Optical transport services have become the standard for high bandwidth and cost efficient communication solutions that are completely managed by the CSP offering them. Customers of these types of services rely on the CSP to monitor the network, maintain it as needed, replace aging or broken equipment and find and address problems as they occur. In terms of bandwidth flexibility, capacity is limited to a single channel and the service type requested. If a customer orders a 1 Gigabit OTS, they need to purchase a completely new channel to exceed this capacity. The protocol and data rates of OTS networks are based on the equipment providing the service and while turn-up times for new services or added capacity have decreased over the years, companies can still expect to wait days or weeks once an order is placed. Lastly, while CSPs have been able to achieve very high data transfer speeds on these networks, added latency is introduced due to the amount of equipment providing the service and number of optical-electrical-optical (O-E-O) conversions that must be made. This equipment also potentially introduces more opportunities for network failure, though this has been mitigated by CSPs that understand that a failure is not an option.
DARK FIBER Dark fiber also has considerable benefits and drawbacks. This approach has become popular due to the increased flexibility, control and future bandwidth capacity it can offer to customers. However, to obtain these benefits, firms must also take on increased capital spending and labor-intensive, end-to-end management responsibility. This often includes a significant upfront investment as well as management of everything from equipment, the quality of light passing through the network and monitoring the continuity of the fiber span itself. Companies that invest in dark fiber rely on internal teams to support it, even though these teams don’t always possess all of the skills required to manage it end to end. While this presents certain risks, there can also be a cost-efficiency upside, especially if the customer requires more than two wavelengths on a single span.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
BRIDGING THE BENEFITS GAP BETWEEN TWO POPULAR APPROACHES An emerging solution for customers that seek the CSP-provided end-to-end management benefits of OTS and the flexibility of dark fiber will soon bridge the gap between these two common approaches. With an Intelligent Fiber Service (IFS), financial services firms can purchase a hyper-flexible fiber wavelength to which they can connect their own equipment. As a result, they can utilize the wavelengthin virtually any capacity that suits their needs without having to also take on the burden of managing the fiber strand itself. IFS is a managed, pre-provisioned, point-to-point Layer 1 optical service. It is the equivalent of reserving a lane on the aforementioned super highway that will not carry any other data beyond what one firm sends. Whereas with an OTS solution, where customers are limited to one bandwidth speed (1G, 10G, etc.), IFS enables the ability to almost immediately scale bandwidth up and down based on need, without incurring additional costs. Additionally, latency is further decreased as a result of less service provider equipment being added to the network. From an investment perspective, IFS offers unlimited single channel bandwidth without a capital outlay. This approach represents a significant competitive and revenue enhancing opportunity for firms that are increasingly looking for future-proof protection and a market edge.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
EVOLVING NETWORKS FOR THE FUTURE The financial services industry has largely driven telecommunications network innovation from a technical, uptime, latency, responsiveness and economic point of view. Extensive research into the future needs of financial services organizations clearly shows that when it comes to a telecommunications network, financial services firms want increased visibility, capacity and control. This means: 1) Visibility into the network of circuits supporting an organization for a real-time view of its health, speed and capacity. 2) Access to necessary bandwidth capacity as the need arises. 3) Control over the allocation and use of bandwidth at any given time to accommodate the peaks and valleys that accompany the financial services business, and the flexibility to make changes to circuits as needs continue to change. These features must be delivered over a separate, custom designed, low latency network between key financial data centers designed specifically for the New York metro financial services market. This includes a physical optical domain, separate from a CSP’s existing optical domain as a foundation for OTS, IFS and metro Ethernet services for the financial community. The high-speed, high-bandwidth services offered over this network – whether a traditional OTS or emerging IFS – will be pre-provisioned to the interconnection point of the data center through pre-ordered cross connects, enabling a five business day install interval from time of order confirmation. This vision for a financial data network of the future will not be realized over night, but CSPs that can deliver this experience will be ahead of the curve in meeting the needs and demands of the financial services market.
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THE EVOLVING TELECOMMUNICATIONS NEEDS OF THE FAST-PACED FINANCIAL SERVICES MARKET A SERVICE PROVIDER VIEW OF THE FINANCIAL DATA NETWORK
LIGHTPATH IS POSITIONED TO MEET YOUR NEEDS Lightpath is a New York metropolitan area-based market leader in Ethernet-based communication solutions with more than 4,000 fiber route miles connecting more than 4,000 buildings. Given its focus on the finance capital of the world, Lightpath has tailored its 100% fiber network and services to meet the stringent, evolving needs of its customers in the sector. Today, Lightpath serves more than 350 financial services customers, ranging from hedge funds and global investment banks to advanced trading firms and key data centers. Lightpath delivers a wide range of products, including 40 Gigabit and low latency OTS, Virtual Private Ring Service and IFS to help financial services firms take advantage of constantly-evolving market opportunities. To learn more, visit http://www.GoLightpath.com/financial_services.shtml.
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