• Independent agency broker with over 10 years of experience providing high-throughput, low latency technologies to the professional trading community.

• Facilitates trading for high-frequency clientele as well as more traditional buy-side and other proprietary trading operations.

• Close to issues affecting high frequency trading, with no proprietary interest of our own

Lime does not engage in proprietary trading, internalization or dark pool operation.

• Products and services include: co-location (hub & spoke and LimeInside), algo trading, options trading, virtual brokerage and ultra-low latency data.

About Lime Brokerage

• Hundreds of millions of shares traded by our HFT clients last Thursday with no issue.

• Comprehensive pre-order controls before every single order/trade.• Clients were providing liquidity throughout the day, especially during

the most volatile periods.• A prime example to us of HFT continuing to bring efficiency to the

markets.• Insertion of pre-order controls is consistent with ultra-low latency.

A Comment on Last Thursday

Where Latency Exists

Physical Distance

Network Equipment

Software

Network hopsSwitching latencyServer nic cards

Client SoftwareBD validationTCP/IP Stack

How far from the matching engine

Some are optimized, but still room to reduce further on others

Mos

t to

Leas

t Inh

eren

t Lat

ency

• Latency game is nearly over for data delivery, order management and matching logic.

• Anyone willing to make the appropriate investments can quickly reach minimum latency using conventional technology: software architectural efficiency is reaching canonical perfection.

• Industry’s top performers have used every trick available with standard technology and have squeezed latency as far as it will go.

• Need further enhancements from the computer science sector.• Best Bet: Should be working in partnership with your provider to help

restructure code. Huge gains can still be made in computational algo restructuring.

• FPGA work ensuing. True exploration of ASICs and fabrication technology is yet to occur.

What can we do to reduce latency?

• Evidence of poor quality latency monitoring and reporting by firms.• Apples and Oranges – little standard exists, mostly marketing buzz.• Industry needs to be intellectually honest, customers already know

but are being confused with disinformation. • Within design tolerances, look at what comparative technology can do

to aggregate risk, interact with the markets and provide configuration flexibility.

• Co-location is but one piece to consider, in many cases the benefit of colo is negated by sub-optimal internal latency and applications.

• Need to segregate: co-location, intra-process, through box, network, match interaction and message acknowledgement latencies.

Monitoring Latency

Latency Monitoring Matrix

CategorySingle

MessageNormal

BehaviorPeak

Throughput

Co-location

Intra-Process

Through Box

Network

Match Interaction

Message Acknowledgement

• Need to agree on what is high frequency trading.• Need to agree on what is fair access. • We must avoid a regulatory environment which becomes a “race to

the bottom”. • Stop procrastinating, rules banning naked access are inevitable.• Any structures providing unfair advantage to certain participants

should be disclosed – preferential order types, IOIs/Broker ‘flash orders’, dark pools, prop trading etc.

• There is nothing wrong with regulators keeping track of who’s trading provided that steps are taken to protect the intellectual property of the inventor.

We are at a Critical Juncture for HFT