Time synchronization, time stamping essential for data integrity and compliance in high frequency, algorithmic trading
FSMLabs, provider of software and hardware for high-precision time synchronization and distribution advises market participants to more precisely and accurately document trading data, today announced the results of its research with TABB Group in the report, “When Time Fails: Trading, Tech and Time.” The research concludes that reliable time stamping and clock synchronization can lead to better analysis of information, data, markets, trading capabilities and risk reduction.
After a series of market structure challenges and global concerns around high frequency trading, the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have proposed new regulations to increase precision for time stamping and improved clock synchronization. The SEC will require registered business clocks to be synchronized to a currently undefined “industry standard” to support its Consolidated Audit Trail, which will allow regulators to have a single, almost real-time view of the markets. FINRA recently ended a rule comment period which would lower the current business clock synchronization standard from a 1 second National Institute of Standards and Technology (NIST) differential down to 50 milliseconds.
According to TABB Group, movement toward more precise clock synchronization practices will allow for significantly stronger data quality across the industry and aid firms and regulatory agencies in better understanding fast-paced market movements. Furthermore, precise time stamping is invaluable for the construction of market events and detecting abuses such as spoofing. Key findings in the report suggest:
Sophisticated time synchronization provides less data confusion across markets and allows firms to more easily integrate and align market data.
Poorly synchronized datasets prevent opportunities for accurate back-testing and analytics.
More granular timestamps facilitate the development of superior execution platforms that can detect slippage, analyze routing structures and performance.
Larry Tabb, Founder and CEO of TABB Group and author of the research said, “Electronic markets and algorithmic trading continue to push the boundaries of speed and thus require more precise documentation and monitoring practices,” He continues, “Guessing games and inaccurate data will no longer cut it. As an industry, we need to catch up to the speed of information to make sure we are doing right by our businesses, firms and our clients.”
“Regulators are just beginning to see the importance of accurate and reliable time synchronization for financial markets and beyond,” said FSMLabs CEO, Victor Yodaiken. “Recent global market structure failures and abuses continue to highlight the need for auditable time stamping and data integrity practices. Firms that do not quickly get into shape will face immense operational risk and sharp regulatory consequences.”