By means of Richard Hoptroff, CTO and founder of Hoptroff
When the time and date of a particular event are recorded digitally or manually, we would say that the event is timestamped. From social media posts to high-frequency trading, timestamps in the digital age are everywhere and are used to validate actions of a given event.
Timestamps allow organizations to track events that happen at a specific time. Knowing what happened at an exact point gives the user control over the information and a more definitive direction for addressing situations of the event that happened in that specific time period.
For example, an organization digitally signs an agreement with another party. Later the agreement is broken. This can be caused by a number of reasons, one of which is a slippage in the price of the deal before the deal was completed. The party in question claims to be entitled to the action that broke the agreement, as it happened before the deal was completed. The digital timestamp of the contract can tell you exactly when the contract was signed and whether the action took place before or after this moment. This accuracy is extremely helpful in any settlement and the more accurate the timestamp can be, the less confusion and ambiguity is created.
Timestamps in the financial services industry
In the financial industry, high-frequency traders and other fast-paced professions require microsecond speeds that are consistent across their network. Therefore, having a resilient, traceable and most importantly accurate timing infrastructure becomes increasingly important as we move to cloud-based networks.
In this industry, incorrect timestamps can result in canceled transactions, which can be costly for financial companies around the world. To mitigate this risk, the Markets in Financial Instruments Directive II (MiFID II) in Europe and the Consolidated Audit Trail (CAT) regulation in the US have sought to ensure that corporate clocks are synchronized and accurate to 100 microseconds UTC, respectively .
From a global trading perspective, billions of transactions are processed each year. This means that every second an enormous amount of data arrives at the exchange. In addition, thousands of orders are processed simultaneously, be it cancel, buy or sell. Regulation of these actions helps with litigation against organizations. By complying with these regulations, companies avoid an unnecessary bad reputation and sour relationships with customers. The most common problem for companies is probably the traceability and monitoring of such a high frequency. Not being able to trace the events back to the exact moment of execution can easily tarnish their reputation.
While this regulation has brought consistency and order to financial services transactions, it has also placed the responsibility on businesses to find and implement a compliant solution. For SMEs in particular, it can be expensive and labor intensive to roll out a timing solution. Ideally, timestamping should be a cheap, secure, and verifiable public source that complies with current regulations.
The importance of verification
A development of timestamps in the digital age is the digital hash ledger. These smart timestamps use a piece of information from the last event, called a “hash,” to chronologically arrange exactly how events happened without being tampered with or changed by outside parties. These timestamps can prevent current systems from becoming vulnerable due to delays. Such delays would make the event being stamped appear out of sequence, providing a misleading causal trail of events. Ultimately, data cannot be used to justify a particular event, but by providing an accurate and traceable timestamp, users can verify the timing of an event and create an authoritative and certifiable timestamp.
Timestamps also allow authorities to prove that their data is correct. By using a timing solution traceable to a stratum0 source of UTC, each event can be checked and validated. This technology therefore has the potential to resolve disputes, even in court, by proving the exact timing of an event.
The precision and accuracy of timestamping has never been more important. In the financial services industry, where tiny fractions of a second matter, regulators have stepped in to make sure transactions go smoothly and without confusion. This helps both individuals and organizations clarify exact timings so that the transfer of the right amount is delivered to the right place at the right time.
Using innovative solutions
There are many outdated hardware solutions that large companies still use to this day. Despite their accuracy, these cumbersome solutions are extremely expensive to build and maintain, not to mention the hassle and time required to build a new timing infrastructure in each data center. In this digital age, network-based solutions are reliable and easy to scale, storing data in the cloud rather than in-house data centers. In addition, network-based solutions are only a fraction of the price of hardware and require no additional overhead. By switching to network-based solutions, organizations free up time and resources to be used efficiently elsewhere.
Another essential consideration when choosing a timing solution is resiliency. As space weather, jamming and spoofing, and satellite glitches increase, it becomes increasingly risky to rely, as most solutions do, solely on a single satellite time source. Modern solutions have integrated multiple satellite and terrestrial feeds to ensure secure, consistent, and highly accurate time.
It is a challenge to find a timing solution that is accurate, resilient and easy to implement. End-to-end solutions for your timing infrastructure take a lot of time and effort to build and maintain. Using network-derived Traceable Time as a Service (TTaaS®) solutions would provide accurate, reliable and digitally encoded time that can help keep up with the pace of commerce, as well as modern technology.
In most financial systems, the central hub determines when an event officially takes place, and as terrestrial technology matures, the demand for cheaper, reliable and traceable alternatives will increase. The move to cloud-based technology has become the norm for most infrastructure, and timing solutions will follow suit. Organizations need to adapt their timing structure to keep pace with a world increasingly reliant on digital solutions, and to compete with other companies that are already innovating.