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  • Writer's pictureDAVID MITLYNG

Weekly Takeaways-June 15, 2023

Updated: Jun 19, 2023

Theme of the Week

Time is Money

On August 1611, a clock chimed over the newly opened Amsterdam Stock Exchange. While it wasn't the world's first financial market, it was considered the first modern stock exchange. The key difference?

Time. Prior to this the markets weren’t well regulated so the city dictated a limited trading window, making it “easier for buyers to find sellers and vice versa” which “led to a vast expansion of liquidity in the marketplace.” Clocks weren’t only about marking the opening and closing of the exchange – they also made sure everything is above board. A timestamp is necessary to mark the sequence of a financial transaction and prevent traders from unfairly jumping the queue. But this only works if everyone agrees on the time, which drove the advancement of early clocks and synchronization networks (see below). We have long since moved on from real, physical trading floors where people barter face-to-face. The financial market today is a disperse and complex entity that is regulated by time. This is even more challenging with the emergence of algorithm and high-frequency trading (HFT) that automate transactions at computer speeds.

Some of the toughest regulations "to increase transparency" by demanding verifiable timestamps could be enacted with the European Markets in Financial Instruments Directive, also known as MiFID II.

While the regulations are still in work, their current iteration demands timestamps for transactions that are synchronized to UTC down to one millionth of a second.

So the drive for accurate and secure time synchronization continues.

Last Week's Theme: The Need for Secure Time

Industry News

Conferences

The More You Know...

Advancements in clocks – and their synchronization – have historically been driven by business. Early sundials, water clocks, and pendulum clocks helped organize early shopkeepers and trade. By the 1800s, the opportunity for maritime trade drove the development of the marine chronometer, the Greenwich Mean Time (GMT) standard, and synchronization using time balls as a visual cue “to enable tall ships in the Thames to set their marine chronometers.” A few decades later, railroads drove advancements in synchronizing stations to railway time" using telegraph. This led to a GMT synchronization service for stock exchange, banks and businesses “who required standardised time to prove their compliance with licensing laws.”

Today, all modern commerce, financial transactions, and communications get their time from GPS. Which is ironic, because GPS was not developed or maintained for this - it was intended for military use. As such, the needs of the financial markets aren't being met with this service. Strict financial regulations for timing that can be traced to an authenticated source are creating a new market for time synchronization:

  • In the US, a recent Executive Order directed the National Institute of Standards and Technology (NIST) to provide a fee-based Time over Fiber service to businesses that want to remove “dependence on Global Navigation Satellite Systems (GNSS)”.

  • In Japan, the National Institute of Information and and Communications Technology (NICT) offers time dissemination services over leased line and telephone for businesses.

  • In the UK, the National Timing Centre (NTC) is starting to offer NPLTime to provide “MiFID II compliant reporting” and “accurate time stamping.”

Commercial options like the Deutsche Börse High Precision Timestamp (HPT) Service are also in development. These systems rely on direct terrestrial lines to the authenticated time source, which is still not completely secure.

What is needed is a global time distribution system that is provably secure.


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