Forex Magnates reached out to Beeks FX VPS’ CEO Gordon McArthur for his exclusive perspective on VPS, what exactly the technology consists of, and why it is integral to the forex industry and your business. 1. What is a VPS in the forex industry and who needs one nowadays? A VPS is a Virtual Private Server. It consists of a virtualized server which is broken into smaller pieces, that is located in a secure datacenter with multiple internet connections and feeds which allow traders to deploy their algorithm from any platform they want in an environment which is constantly operational 24/7. Anyone who is running an algorithm or any form of automated trading from a retail trader point of view needs one. Clients can range from customers of eSignal and Interactive Brokers to NinjaTrader, cTrader, MT4, etc. 2. What about other customers that have latency issues? People from developing countries who no longer buy PCs and only have mobiles or tablets can access our always-on connection to setup their algorithm trading can turn to VPS. 3. Are you seeing pickup in usage of platforms other than MT4 and which? Over the last 4 to 5 months some alternative platform providers are starting to nibble away market share. MT4 still dominates, but we are seeing a lot of uptake on cTrader and we are actually seeing a set of clients, which are more sophisticated and are using FIX API to connect. They are not using the classic retail front-end. 4. What’s slow and fast latency in the VPS world? Latency is a measure of time representing how long does it take for a digital message to get from point A to point B. The two major data centers which we are using are located in New York and London. Imagine that you are sitting in front of a PC in China and you are sending an order to New York. The latency would be around 300 milliseconds. While in the real world this sounds fast - its only about 0.3 of a second, but if you look at an FOMC announcement the market is changing very rapidly. Sometimes the FX prices can change more than 200 ticks per second, so by the time you send your order from China to New York the market could have moved 70 times. The fastest it gets for retail clients is about one half of a millisecond. If you look at some of our cross connected brokers and bridge providers like PrimeXM, OneZero, etc., we can send a client side trade from us to the bridge provider in half of a millisecond. In theory this latency elimination should reduce Slippage , and the amount of price changes which you see on your terminal should be quite different.
5. How can non-algorithmic traders benefit from a VPS or from a low latency? We’ve done a lot of testing on this matter - if you look at a major announcement like the FOMC, the market is moving 150 to 200 times a second. If a client is manually trading in a distant region of the world, he will not see a lot of the price changes, because each tick is taking a third of a second to get to his screen. If the market is moving 300 times a second, the trader will be lucky if he sees 20% of the price changes just because the client terminal can’t keep up with it. If the client has a VPS he can see all of the price changes happening and the price ticks, however he will still have the latency from pressing his keyboard key on the local device, and there is no getting around this problem, but at least he will be able to see the full market movement. If a trader is not trading during news and he is trading manually there is pretty much no benefit from using a VPS 6. What’s the current geographical distribution between retail clients of VPS services? I don’t think it varies much from the overall number of traders around the globe, but our biggest growing segment are the developing countries, where there’s a lot of interest from customers in the Far East and Australia. We do have a very big US client base because of partnering with FXCM and Forex.com, but there is not much scope for growth there.
