Ice builds out low-latency trading connectivity in Asia

Intercontinental Exchange (Ice) is expanding its Ice Global Network in Asia with new access centers in Hong Kong, Shanghai, and Tokyo. These enhancements include ultra-low-latency access to local markets, including the Hong Kong Stock Exchange (HKEx), the Japan Exchange Group (JPX), and the Shanghai Futures Exchange (SHFE). 

The Ice Global Network offers data delivery, and execution services over fiber and wireless networks. It also provides hosted and managed services and cloud offerings to provide customers with flexible options for accessing data. 

These enhancements in Asia will serve a growing high-frequency trading community in the region, and support the growth of local quant and alternative funds, says Magnus Cattan, head of Ice fixed income and data services in Apac.

“We had a global network in Asia, but it was aimed at distributing data. It wasn’t necessarily supporting the ultra-low latency community,” he tells WatersTechnology. 

The exception to that is the Go West Network, a transpacific ultra-low-latency network to which Ice sells access. The network, which was reportedly formed in 2016 by a consortium of trading firms including Jump Trading, Virtu Financial, DRW Holdings, IMC, Optiver, Tower Research, and XR Trading, uses a combination of wireless towers, fiber-optic lines and submarine cables to connect CME Group in Chicago to JPX. To deliver low-latency trading access, Ice leveraged that network and then extended that connectivity to the JinQiao datacenter in Shanghai. The fiber extension offers the Shanghai trading community access to North American market data, including futures on Ice and CME. 

“We found that the high-frequency trading community in Shanghai is quite large and active and are looking for best-of-breed solutions to support their trading strategies,” Cattan says. 

Having full fiber gives you that connectivity in a resilient way. It’s not going to be as low-latency as a fiber-wireless combination, but it’s still going to be pretty low-latency as well

Magnus Cattan, Ice

A report by Nikkei Asia estimates that total profits generated by HFT in China’s futures markets totaled about $720 million in 2019. 

As Benjamin Quinlan, CEO and managing partner at Hong Kong-based strategic consultancy firm Quinlan and Associates, previously said, the HFT community in the region isn’t as robust or mature as the communities in Europe and North America as the data hasn’t been there to support those trading strategies. But that is changing, he added. 

Cattan says demand for the Chicago-Tokyo-Shanghai network became the driver for Ice to build more mature capabilities for its Ice Global Network in Asia. It hopes to leverage its expertise as a futures exchange owner and operator to drive further growth over the network. 

“A lot of those futures exchanges form a central part in high-frequency trading ecosystems; they’re looking at futures markets to help them hedge risk, or for trading opportunities. We feel that we can bring that knowledge to their conversations. It’s not just about the speed of the circuit from point A to point B, but also about what kinds of contracts people might want to be looking at and why,” he says.

The process involved setting up co-location services at JPX and HKEx. However, since it isn’t a futures member of SHFE, it has a proximity datacenter as close as it can be to the exchange. 

Ice will also provide managed services, which could include Ice procuring and managing hardware on behalf of  customers. “This can be important in markets like Japan, where a lot of firms may not want to have a physical footprint for taxation reasons,” Cattan says. 

All in one go

To support this investment—worth “millions of dollars”—in Asia, Ice wants to offer as complete an offering as it can, Cattan says. “So rather than say, ‘We’re going to just offer hosting, or low-latency, or just DMA,’ we’re doing it all in one go. We’re looking at offering hosting and premium hosting at each location that makes sense, managed services, direct market access, as well as low-latency circuits. And that’s all going to be completed within the next one to two quarters,” he says.
 
By the end of this year, it will have standard hosting—which includes hosting, connectivity, and timing services, with access to local and remote markets, private bandwidth for trading data, and command and control over VPN—complete in each location. That means Ice can offer co-location hosting in Hong Kong and Tokyo and close proximity hosting in Shanghai. Ice will also make direct market access and ultra-low latency circuits available in each of those markets by year-end. 

Then in Q1 next year, Ice will expand that to add premium hosting in Hong Kong and Tokyo. Premium hosting includes everything in standard hosting, with enhanced access to local markets with Layer-1 technology using field programmable gate arrays and crossbar switching to reduce transit latency to as low as single-digit nanosecond levels. 

Although Ice only handles sales of access to the Go West Network, which provided it with the conviction to expand its data access centers within the region, it’s not stopping there. It is working to provide full-fiber connectivity for that exact route, from Chicago to Tokyo. 

The Go West Network uses a combination of wireless, fiber and submarine cables. But while wireless is faster than fiber, a challenge with wireless data is there could be instances when the signal is broken, says Cattan. 

“Having full fiber gives you that connectivity in a resilient way. It’s not going to be as low-latency as a fiber-wireless combination, but it’s still going to be pretty low-latency as well,” he says. 

Cattan adds that the difference between a full fiber and fiber-wireless combination would be “a few milliseconds.” This would be a huge difference in the HFT world, where things are measured in microseconds and nanoseconds. 

“What we’re doing with this investment is recognizing that some clients either need a backup to a wireless-fiber combination, or the difference of a couple of milliseconds is okay for what they want to do but they want to have that resiliency,” he says. 

Ice is working with telecommunications providers worldwide to select the circuits that “make the most sense” to build into its global network.