An increasing number of financial service providers are taking their services digital, Many, for example, are beginning to harness the capabilities of cloud technology and digital wallets in efforts that facilitate the growth of cashless societies. And so, in light of this, the importance of accurate timing keeping as never been higher.
As Richard Hoptroff discusses in this guest post for The Fintech Times, timekeeping and server clock synchronisation within the world of finance must be kept to a T.
Richard is the serving CTO of the UK-based timing services provider Hoptroff, and here he explains why an increasingly digital society requires accurate and reliable time, the benefits of accurate time for businesses looking to optimise their digital presence, and why businesses should turn to technology partners to help deliver on this goal.
Hoptroff is a disruptor in the timing industry and has developed a resilient network solution. By incorporating a single-time feed from GPS, Glonass, and Beidou, as well as from three grandmaster clocks in London, New York, and Japan, it can deliver traceable UTC to any data centre in the world.
Digital changes are happening every single day. The world in 2021 is almost unrecognisable from that of 1990 – we spend most of our time behind screens, working, studying, and communicating with our loved ones. The pandemic forced most businesses to operate remotely, and many are staying digital as restrictions ease. This means that data processes and protocols that were once centralised and heavily protected have become fragmented and vulnerable to external attacks.
One of these processes is clock synchronisation. Accurate and trusted timestamping is essential for monitoring data operations and improving data quality across stock exchanges, banks and data centres in different locations. If different parts of one process don’t have synchronised server clocks, then their data records will show events in the wrong order and with distorted latency intervals, making it very difficult to work out whether they’ve done the actions they report – this would cause inaccurate timestamps.
The lack of server clock synchronisation within a network is a growing problem for banks, stock exchanges and fintech companies within global financial services. If all the computers don’t share the same time, it can be exceedingly difficult to figure out the sequence in which events occurred in any post-analysis verification and establish causal links that assign responsibility.
Time Synchronisation in Global Financial Services
Consider currency trading: if computer A trades with computer B, and computer A’s clock has drifted five microseconds faster than computer B’s, and the network transport latency of the transaction takes three microseconds to complete, the timestamp data record for the entire transaction (which is the only record of digital events) will show computer B acting before computer A in the process, when the reverse was true.
It may seem minor, but when millions of computers with misaligned clocks trade with each other every day, generating records with chaotic sequence and interval, it’s easy to understand data quality problems could build. If bank A owns computer A and bank B owns computer B, the two companies may dispute on settlement of a trade value because one party did not secure the outcome it expected. A review of the data records will not allow the dispute to be settled decisively, when it should.
This is an issue both for the customers of the companies who operate these systems, and for the regulatory bodies overseeing the sector. Without the ability to verify the order in which transactions take place, it’s extremely difficult to establish responsibility. As a result, financial authorities in the United States and the European Union have implemented timing regulations as part of the CAT and MiFID II, to guarantee that transactions are documented in a logical order with verifiable and trusted timestamps.
Verified and Reliable Server Clock Synchronisation
Stock exchanges, futures, investment firms and banks within the financial services industry must synchronise server clocks on their trading servers with universal time to a degree of accuracy that will give each computer decision a unique and trusted timestamp.
This allows procedures to be reliably reconstructed from machine records after an occurrence. In the EU, GDPR implies that businesses must be able to defend why they have any person’s personal data and, if asked, explain how an automated system utilised it to make a decision that may have had an impact on that individual. Without reliable and trusted timestamped transaction logs, this can become a difficult and costly job. However, if timestamps are accurate then the automated decision-making sequence can be recalled and confirmed as a routine process.
So, how can banks, fintech companies, and stock exchanges verify that their server clocks are synchronised accurately and their timestamps are trusted and reliable? One option is to develop an in-house hardware-based solution. However, this can be too expensive for many businesses: traceable timing requires either three grandmaster clocks or a robust connection to a primary UTC source at every site where servers need to be synchronised, neither of which is cheap to install or straightforward to maintain because of all the new infrastructure that is required.
Connecting to a traceable cloud timing feed is a cost-effective alternative to installing physical clocks for the vast majority of fintech companies which only need traceable timestamping accuracy to hundreds of microseconds.
Cloud timing providers can syndicate extremely precise time to servers in any data centre in the globe over different fibre connections by network connectivity to shared grandmaster clocks in the cloud (linked to several primary UTC sources). Then, using clock synchronisation agents on slave devices steer local timing and keep records of the chain of comparisons for traceability. This fintech solution eliminates the need for extra timing hardware and assures CAT, MiFID II, and GDPR compliance. Instead of expecting that timing will stay correct, regardless of the workload that the machine is executing, the service watches for problems inside each machine that might affect timing and either alerts or logs them individually. Because the entire process is provided as a managed service, maintenance is minimal.
Precise and accurate time synchronisation software is leading the way in accurate, digital timestamping. It enables stock exchanges, futures, investment firms and banks and other trading venues to share atomic timing infrastructure through intelligent software. Indeed, the applicability of timing software will become even more relevant as we progress into the digital age. We anticipate accurate time to become a necessity, not just in a select number of industries but also in everyday life.