Modern atomic clocks tick along much more consistently than the earth manages to rotate around its own axis, which varies due to climatic and geological events. Thus, every so often the global masters of time insert a leap-second in order to align atomic clocks and earth rotation.
Unlike changes in winter/summer-time, humans dont really notice it. Even most software applications dont care about it. However, trading platforms do care, because unique timestamps and sequence of events are highly important for them.
Within the financial industry there is no common approach on how to deal with the extra second and its implications. Many firms will use some flavour of a tactic, where the clock is deliberately speeded up over a certain period, to smooth the transition and not trip up connected systems. While this approach proved successful in the past, it raises concerns in the future, because under MiFID II RTS 25, firms are given very tight boundaries when it comes to business clock synchronisation. It is safe to assume that during those adjustment periods business clocks will deviate from the master clocks by more than the mandated limits.
But as not all tails wag the dog, the earth will continue to tumble through time and space, and it will not rotate more steadily because of MiFID II. Instead, humans might have to accept that sometimes their highly precise technology and rules are off the mark, ever so slightly.
Christian Voigt isSenior Regulatory Adviser at Fidessa
