The importance of 'ping' - latency/connection speed in trading.

nononsense · Sep 23, 2005

Quote from thenewguy:

Sorry to be so late to the party, but I thought I'd offer my opinion....

I've worked in IT for a bunch of different prop firms, and in all sorts of areas of finance. I feel it totally depends on your trading style. The traders I most recently worked with were developing a black box system and we had the ping times down to less than 10ms for a round trip (although that's not including the exchange time). Once you add in the exchange time, (most exchanges like the CME allow up to a second to match the order) it really doesn't matter as much as you think it does. If you really, truly are scalping, or trying to hit some weird spreads or something, then yes, it'll matter a bit. If you're doing that and you're at home, however, you had better know that you are already at a massive disadvantage. I suspect, however, that most "scalpers" are a mix of scalping and trend trading but just call themselves scalpers. Plus, if you're trading futures, the que will negate any good ping times you can achieve, and if you're trading equities on NYSE ping times don't mean anything obviously, but they will help on the NASDAQ.

If you're trading from home, and you really think it's a concern, get a T1 unless you're on some weird island. It should be about $500 a month in most major connected cities (although i'm pulling that number out of my wazooo). DO NOT upgrade your router or anything like that, it's a waste of money. You're likely to get a 1-2 ms improvement on that, when you could get 4 months of a T1 for the same price and see a much bigger improvement. Also, try different ISPs and try to find one that shares the same facility as their backbone provider, if you can. The ISP we use (we direct connect to everything but the smallest of markets for us) shares a facility with EVERY major provider. We simply cross-connect to their cages for connectivity.

Hope that helps,

-The New Guy
More...

Hi New Guy,

Your reasoning is quite solid. For traders not having a direct setup with an exchange, you still have to figure in the time required by the broker's computer to check the authorization and margin/funding status of the account.

As I pointed out earlier, such discussions have been going for a long time already. Most millisecond-ping-dreamers always forget to account for these administrative processing times making a few miliseconds utterly insignificant under typical conditions.

Be good,
nononsense

thenewguy · Sep 23, 2005

Quote from nononsense:

Hi New Guy,

Your reasoning is quite solid. For traders not having a direct setup with an exchange, you still have to figure in the time required by the broker's computer to check the authorization and margin/funding status of the account.

As I pointed out earlier, such discussions have been going for a long time already. Most millisecond-ping-dreamers always forget to account for these administrative processing times making a few miliseconds utterly insignificant under typical conditions.

Be good,
nononsense
More...

That's an interesting take... to be honest, I never considered that. I assumed that those parameters were loaded into my trading platform, and were checked as soon as I clicked the "make a bad trade" button, but now that you mention it, sometimes there is a spot of latency there.

I'm guessing that peice of software resides on the gateways to the exchanges, within my brokers walls. The latency on that is probably tiny comapred to the internet latency just getting there (I don't direct connect for my personal account). But it is definately concievable if there is a seperate internet call to a seperate set of servers that it could double your latency (if that's how your BD is set up...).

Thanks for the thought,

-The New Guy

tomcole · Sep 23, 2005

My view is simply that if there are latencies along the way, the faster your order gets handled the better.

I think its a very reasonable question to ask brokers about their systems, call centers etc.

osho67 · Sep 29, 2005

I did a ping test to IB data server

ping gw1.ibllc.com

I am on broadband

Are these results good? I was told time had to be less than 1000ms, but what are the optimal values?

Pinging gw1.ibllc.com [208.245.107.3] with 32 bytes of data:

Reply from 208.245.107.3: bytes=32 time=1292ms TTL=107
Reply from 208.245.107.3: bytes=32 time=96ms TTL=107
Reply from 208.245.107.3: bytes=32 time=96ms TTL=107
Reply from 208.245.107.3: bytes=32 time=97ms TTL=107

Ping statistics for 208.245.107.3:
Packets: Sent = 4, Received = 4, Lost = 0 (0% loss),
Approximate round trip times in milli-seconds:
Minimum = 96ms, Maximum = 1292ms, Average = 395ms

Thanks

thenewguy · Sep 29, 2005

Quote from osho67:

I did a ping test to IB data server

ping gw1.ibllc.com

I am on broadband

Are these results good? I was told time had to be less than 1000ms, but what are the optimal values?

Pinging gw1.ibllc.com [208.245.107.3] with 32 bytes of data:

Reply from 208.245.107.3: bytes=32 time=1292ms TTL=107
Reply from 208.245.107.3: bytes=32 time=96ms TTL=107
Reply from 208.245.107.3: bytes=32 time=96ms TTL=107
Reply from 208.245.107.3: bytes=32 time=97ms TTL=107

Ping statistics for 208.245.107.3:
Packets: Sent = 4, Received = 4, Lost = 0 (0% loss),
Approximate round trip times in milli-seconds:
Minimum = 96ms, Maximum = 1292ms, Average = 395ms

Thanks
More...

For broadband, that's pretty good. 100 or less is very respectable, but the first one:

Reply from 208.245.107.3: bytes=32 time=1292ms TTL=107

is a bit of cause for concern. Do a ping -t and get a bunch of results (cntrl c to exit) and then you can see if that is a reoccuring theme over time. Even if it is, however, it might not be indicative of the problem because cisco routers (among others) will prioritize traffic and drop pings if they get busy. However, if they are that busy then there might be a problem anyway....

Anyway, here are my results to yahoo. I beleive my set up to be about as fast as you can get right now.

Microsoft Windows XP [Version 5.1.2600]
(C) Copyright 1985-2001 Microsoft Corp.

C:\Documents and Settings\comp>ping -t www.yahoo.com

Pinging www.yahoo.akadns.net [68.142.226.46] with 32 bytes of data:

Reply from 68.142.226.46: bytes=32 time=24ms TTL=54
Reply from 68.142.226.46: bytes=32 time=27ms TTL=54
Reply from 68.142.226.46: bytes=32 time=24ms TTL=54
Reply from 68.142.226.46: bytes=32 time=26ms TTL=55
Reply from 68.142.226.46: bytes=32 time=56ms TTL=55
Reply from 68.142.226.46: bytes=32 time=25ms TTL=54
Reply from 68.142.226.46: bytes=32 time=25ms TTL=54
Reply from 68.142.226.46: bytes=32 time=25ms TTL=55

Ping statistics for x.x.x.x:
Packets: Sent = 8, Received = 8, Lost = 0 (0% loss),
Approximate round trip times in milli-seconds:
Minimum = 24ms, Maximum = 56ms, Average = 29ms

As you can see, there's a high one in there too, but it's about double the average, vs ten times like in your example. If the majority of your times are 100 or less, you're probably doing very well.

-The New Guy

tomcole · Sep 29, 2005

Try going to dslreports.com and checking out their resources - could be helpful!

osho67 · Sep 29, 2005

Thanks, the new ping test shows similar times, except again for the first one, but the average is 124ms

alanm · Sep 29, 2005

FWIW, my API application in California, talking to an Assent server in NJ, takes 90-120ms between the time I submit an order to INET via the local API function and the time I get an "order live" ack back from the API event. This seems remarkably low to me, given that my ping times to the server are 85-90ms when the connection is "quiet". I'm certain that I'm timestamping accurately. I'm remembering that ICMP packets (used by ping) enjoy a much lower priority than other traffic, so it would appear that the actual times for "real" traffic must be quite low.

Just the physical roundtrip distance (about 5500 miles), accounts for 30ms at the speed of light.

osho67 · Sep 30, 2005

Hi thenewguy

How do you manage to get much better timings, are you not just using a modem/router and broadband ?

Thanks

thenewguy · Sep 30, 2005

Quote from osho67:

Hi thenewguy

How do you manage to get much better timings, are you not just using a modem/router and broadband ?

Thanks
More...

Sorry, I should have clarified... I'm at a trading office, where I run the IT set up. We run on dual DS3's that have a very short distance to a DC that is a super POP that most everything we connect to is in also located in. From my home the times would be much, much different.

Thanks,

-The New Guy