Speed is a prerequisite in the financial markets. For institutional traders, the “race to zero” is a mandatory defensive posture. As we navigate a year defined by macroeconomic shifts and surging data volumes, the fragility of standard algorithmic trading infrastructure is being exposed. When markets turn volatile, they do not just move faster, but they produce ‘micro-bursts’ of data that can cripple unprepared systems. Enterprises must ensure that their data foundation does not crumble when the message rates hit their peak.
The technical reality of micro-bursts and data gaps
Many firms operate under the illusion that their bandwidth is sufficient because their average usage metrics look healthy. However, volatility does not distribute data evenly. It arrives in micro-bursts. There are massive surges in message volume in less than a millisecond. These bursts often exceed the peak intake capacity of network interface cards (NICs) and internal ticker plants.
When the hardware hits its capacity, the system suffers packet loss. For an automated strategy, a dropped packet is a data gap. It means the algorithm is essentially blind to a portion of the order book, potentially attempting to execute a trade based on a price that the exchange matching engine has already moved past.
The physics of transmission: microwave vs fibre
Reducing trading latency eventually hits the hard wall of physics. Standard fibre-optic networks, while reliable, are physically limited by the refractive index of glass, which slows light by roughly 30% compared to its speed in a vacuum.
In a market where a ten-microsecond lead can determine the winner of an arbitrage window, this delay is unacceptable. High-frequency traders have bypassed this by moving to wireless microwave networks. Because signals travel through the air significantly faster than through glass, microwave transmission provides the lowest possible tick-to-trade intervals. It is the closest we can get to the absolute speed of light for transmitting time-sensitive stock exchange orders.
How latency undermines your trading strategy
Latency does not just slow you down; it changes the nature of your risk. For ‘latency-sensitive’ models like high-frequency market making or cross-venue arbitrage, a delay of even a few microseconds can push your order to the back of the exchange’s matching engine queue. This loss of priority causes ‘adverse selection’, where your algorithm buys an asset just as it begins to drop or sells it right before it spikes. When you lose queue priority, your fill probability plummets. Instead of capturing the bid-ask spread, you end up paying ‘slippage’, the hidden cost that erodes your annual revenue by millions of dollars.
The strategic value of BPM in market data services
As banks expand their reach into emerging markets and new asset classes, the overhead of managing these bespoke connections becomes unsustainable. BPM for market data services provide banking a strategic solution. Market data BPM involves the management of complex technical stacks and vendor relationships. With a BPM partnership, firms can diverge from managing dozens of individual exchange relationships and proprietary hardware stacks.
This approach provides a unified, scalable framework for accessing global liquidity pools while ensuring that the infrastructure remains compliant with global regulatory standards. It allows the internal team to focus on what they do best: developing the strategies that generate alpha.
Actionable insights for infrastructure resilience
Building resilience requires a shift from reactive maintenance to proactive infrastructure management. Key steps include:
- Auditing ‘burst readiness’: Evaluating if current connection capacities (e.g., 10Gbps) can survive the brief but intense 24Gbps surges common in volatile markets.
- Optimising the transmission path: Identifying routes where wireless microwave technology can be deployed to shave off the microseconds added by fibre-optic glass cores.
- Leveraging managed expertise: Utilising external managed solutions to oversee the daily health of data feeds, allowing internal researchers to focus exclusively on refining strategy and alpha generation.
The future of execution excellence
The pursuit of speed and data integrity is an ongoing battle that requires constant investment and architectural refinement. For forward-thinking enterprises, the goal is to create a seamless link between market insight and execution. By addressing the physical, architectural, and operational bottlenecks in the data supply chain, firms can protect their margins and maintain their competitive edge. In the end, the winner is not the firm with the best algorithm, but the firm with the best data reaching that algorithm first.
How can Infosys BPM help optimise market data operations?
Infosys BPM financial services provide end-to-end, AI-first solutions designed to harmonise the market data services banking lifecycle. We help global financial institutions navigate the complexities of low-latency market data by streamlining procurement, managing exchange compliance, and optimising algorithmic trading infrastructure. Our domain experts focus on reducing operational overhead and eliminating data gaps, ensuring your strategies remain agile in volatile markets.
Frequently asked questions
Micro-bursts are millisecond surges in data volume during volatility that exceed average capacity, causing packet loss when NICs or ticker plants overload. This creates data gaps, leaving algorithms blind to order book changes and executing trades on stale prices.
Microwave transmits signals through air near light speed in vacuum, avoiding fibre's 30% slowdown from glass refractive index. This shaves microseconds critical for arbitrage windows and exchange queue priority in high-frequency trading.
Latency delays push orders behind faster competitors in exchange queues, causing fills at worse prices as markets move (slippage) or buying rising/selling falling assets (adverse selection). Even microseconds erode spreads and annual revenue significantly.
BPM centralises exchange relationships, compliance, and infrastructure management, freeing internal teams to focus on alpha-generating strategies rather than vendor/hardware operations. This scalable model supports global liquidity access without proportional overhead growth.
Steps include auditing burst capacity (e.g., 10Gbps vs 24Gbps peaks), optimising paths with microwave where viable, and using managed BPM services for feed health monitoring. Proactive infrastructure prevents data gaps that undermine automated execution.
