MarketFactory, a technology company set up last year by three senior EBS executives, will begin rolling out Sherpa Connect, an adaptor to provide ‘ultra-low’ latency connectivity to foreign exchange platforms and exchanges, in the third quarter.

The company says that many third-party adapters available on the market to connect clients with exchanges and ECNs have been developed for the equities space and often fail to take account of the unique data and market structures of FX. This leads to pre- and post-trade information being misinterpreted or dropped, slippage and lost profits, it says.

Sherpa Connect has been architected specifically for the foreign exchange market and is designed to tackle this, officials say. The offering is essentially software code that enables connection to ECNs for market data receipt and order submission. It provides interpretation of the data, translation into a flexible trading API, and optional connection to third-party middleware to ease integration into existing trading infrastructure.

Ed Howorka, CTO of MarketFactory, says, “Correct interpretation of apparently similar fields that actually have very different meanings across ECNs and exchanges is critical. There is a high opportunity cost if valuable data is ignored or not understood. Even when an exchange uses FIX, throughput and latency considerations are necessary but not sufficient. Foreign exchange has distinctly different characteristics from equities, fixed income and other markets in terms of its global nature and microstructure.”

Sherpa Connect can also be deployed with MarketFactory’s Whisperer product, which launched last summer (Profit & Loss, July/August 2008). Whisperer is software that aims to improve on market data from FX ECNs in distant locations by building a picture of the current and future order book at each exchange. The purpose of the software is to help traders overcome distance latency issues, get a better picture of what the prices are and improve fill ratios.

Source: Profit and Loss