There's vast new demand for specialist low-latency connectivity from financial services clients, Michael Ourabah, CEO of Dublin-headquartered BSO tells Light Reading.

And this is all down to the huge rise of algorithmic trading and automated market-making.

So Ourabah's company and optical subsea cable makers EllaLink have partnered up to connect European financial service clients with Latin American markets, the two companies announced today.

Figure 1: Joined-up thinking: Dedicated subsea connectivity means lower latency – vital when it comes to high-frequency trading.
(Source: Ellalink)

"We're seeing Latin America picking up tremendously in the last 24 months; since coronavirus it's had almost a restart," Ourabah said in an interview.

They will use EllaLink's new subsea optical cable linking Fortaleza in Brazil straight to Funchal and Sines in Portugal, 150km south of Lisbon.

The cable will help investors in Europe and Asia trade on the financial markets in Brazil and elsewhere in Latin America, with less latency than going via the US.

"Brazil can be used as a first point of trading, to go into Mexico, Argentina, Columbia and Peru," says Ourabah.

The EllaLink cable, which became ready for use in June, has a capacity of 100 terabits per second.

By comparison, take its predecessor Atlantis II, which stretches 12,000km from Las Toninas, Argentina, via Fortaleza and on to Lisbon. This has been in service since 2000 with a capacity of just 40 Gbit/s.

EllaLink uses hollow-core optical fiber which is "35% faster and lower latency than normal single core fiber," by establishing a straighter path for the laser signal down the signal instead of "bouncing around inside the cable," he says.

Speed dating

High-frequency trading – quickly buying and selling an asset, within fractions of a second, and doing this over and over to take the most advantage of shifts in its price – now makes up as much as 40% of trading volume in equities.

To play high-frequency trading well, you want the lowest-latency connection to the market floor.

And firms with ultra-low-latency direct market access can do this best of all, and can transmit a buy or sell order, have it executed, and receive an acknowledgement, within 10 milliseconds.

Figure 2: (Source: Ellalink)

"Latency is one of the biggest drivers in finance," says Ourabah. Diversity is the second biggest, allowing investors to continue trading if the quickest route gets congested or goes down.

So if you're a connectivity provider servicing financial services, "you need to build the lowest latency primary path, and also the second and third lowest latency paths that have no physical overlap," he says.

Fighting in Syria, for example, ruled out certain fiber routes from Europe to the Middle East. And India is "growing so quickly, and constantly building new buildings, that on a daily basis fiber infrastructure is getting cut and destroyed."

This is what BSO specializes in.

He says "you can't be a generalist telco here," but instead you need to understand the specific needs of financial services firms, while also understanding how to patch together different bits of cable into diverse, non-overlapping, low-latency and redundant alternatives.

For example, radio frequency (RF) point-to-point connections can be better than "zigzagging around mountains, lakes, or geopolitical boundaries," he says.

BSO has acquired an RF company to boost its intellectual property offerings in this direction, the largest of four companies BSO has purchased in the last four years.

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Ourabah says his company spotted the "big shift away from phone trading, and people ringing their broker," and decided to build the "absolute lowest-latency network possible" between 100 largest stock exchanges after Chicago, New York and Frankfurt.

The largest telcos, he surmised, would market their own fiber offerings to these. So there was more room to focus on emerging markets, and be the "de facto leader in serving financial services in capital markets from a technical standpoint" there, he says.

With 11 offices globally and founded in 2004, BSO specializes in providing network connectivity, cloud and hosting services, especially in financial services, with currently over 600 clients.

The biggest challenge for his company, he says, is that emerging market countries can be "a lot more rigid when it comes to market openness, so operating RF networks there takes a lot more convincing of the regulator and existing telcos."

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— Pádraig Belton, contributing editor special to Light Reading