If you’re a long term investor, you may be less concerned with the speed of an exchange as much as you would be with liquidity. But if you’re into swing or day trading, or if you’re exposed to highly volatile assets – such as crypto – the speed with which orders are matched matters.
The term, low-latency, is key here. From the ‘90s onwards, when innovative trading firms started automating the process of market making and realized that faster market participants would thrive, a race to the bottom took place with millions of dollars being invested in low-latency software.
Now the battle has spilled over into our industry. With the emergence of a wide range of cryptocurrencies, and thus a multitude of opportunities, exchanges have become more attentive to the need for speed.
Especially as the industry matures and big institutional players join in, exchanges need to be capable of handling large order volumes – similar to tier-one financial markets – and they need to be fast enough to enable traders to sell and buy at the best prices.
With AAX, we’ve set out to meet this demand through our collaboration with LSEG Technology. Specifically, we’ve taken the same matching engine that powers tier-one exchanges, such as the London Stock Exchange and Borsa Italiana, and placed it right at the core of our own exchange.
A matching engine is an electronic system that matches buy and sell orders – it is the most important part of any exchange, as the primary function of an exchange is to enable investors to trade.
AAX’s matching engine is known as the Millennium Exchange trading platform, and since we’ve received some questions about it, we’d like to provide some more information on this technology.
How is Millennium Exchange related to LSEG Technology?
Millennium Exchange trading platform provides market-leading performance and reliability. It is part of LSEG Technology, London Stock Exchange Group’s technology solutions provider.
LSEG Technology provides market infrastructure technology to a wide range of first-tier financial markets, including traditional stock exchanges, inter-dealer brokers, central securities depositories (CSDs), and with AAX now a cryptocurrency and digital asset exchange as well.
What other solutions does LSEG Technology provide?
In addition to its renowned Millennium Exchange trading platform, which is among the world’s most powerful trading software, LSEG Technology offers specialized capital market products and services, including:
- Millennium SOR, which provides ultra-low latency, flexible, and intelligent order routing;
- Millennium MarketData, which unifies and distributes large data streams across asset classes;
- Millennium PostTrade, for real-time, cross-asset clearing, settlement, risk, and CSD solutions;
- Millennium LiveOps, offering a comprehensive system to optimize operations;
- Millennium Surveillance, built to detect abnormal trading behavior and enable rapid compliance with regulatory changes.
What latencies have been recorded at AAX?
We’ve recorded latencies as low as 90 microseconds, with averages below 500 microseconds, and most orders being processed in under 800 microseconds. This puts AAX on a par with traditional markets – and depending on where clients are based such numbers can be brought down even more.
Besides speed, what are some of the other benefits of Millennium Exchange?
Some of Millennium Exchange’s key benefits include its adaptability, as it can be configured to trade any product in any type of market – essential in a rapidly-evolving industry – and reliability coupled with scalability, due to it having been built on a rule-based, distributed, and fault-tolerant technology.
So, what’s so special about AAX’s matching engine?
This is the first time that a matching engine, used in world-leading traditional financial markets, is powering a cryptocurrency exchange.