Connectivity refers to the ability to make, maintain and transport packets of data between two points. Consistent and reliable connectivity is essential in an electronic trading environment.
In general, a trading system's effectiveness is defined by its connectivity and its latency, or the time delay of data transmission between two points. Latency and connectivity have become increasingly important in a high-frequency trading environment.
Exchanges offer two types of connectivity:
- Indirect connectivity in which a customer's broker, futures commission merchant (FCM), clearing firm sends trades to the exchange platform.
- Direct connectivity means that the customer has a line directly to the exchange platform.