The TMX broadcast centre in Toronto.FERNANDO MORALES/The Globe and Mail
Blink as fast as you can. Now consider this: the new Toronto Stock Exchange trading system can process a stock transaction about 4,000 times faster than that.
With a month to go until the Toronto Stock Exchange moves to a new, faster trading engine, TSX owner TMX Group Inc. says its new system is posting median latency of 26 microseconds from the edge of the exchange's network.
That means that half of all orders take less than 26 microseconds to go from the customer's router, through the new Quantum XA engine, match a trade (or not) and back out. A fast blink is 100 milliseconds, or 100,000 microseconds.
The existing Quantum system that's being retired was still faster than a blink of the eye at about 2 to 3 milliseconds for a trade, or about 2,000 to 3,000 microseconds.
So this is much, much faster. It's even faster, in fact, than TMX had advertised it would be.
And as with many upgrades in trading technology, there is a debate. There is the usual grousing from Bay Street about the costs to connect to a new system, which requires testing and upgrades by users.
But the bigger question is, who will benefit?
TMX says everybody will, because the market will be faster, spreads will be tighter and speeds will be more consistent. As TMX says in its marketing materials for Quantum XA, this "will benefit the Canadian equities market as a whole, in that it will lead to improved market quality and efficiency, increased order flow and turnover, and additional size at the top of the book and tighter spreads, while operational risks are decreased.?
However, critics say that the real beneficiaries will be high frequency traders. That's because some work that used to be done in the TMX trading engine will now have to be done by users. And if HFT are faster, that creates a speed advantage for them. That may lower the ability of some investors to get good fills.
We will know starting in June.