Opening Cross: The More Things Change...
… The more convinced I become that gaining an advantage in trading comes down to only a few differentiating factors, with speed a key component.
Already the New Year has brought a new raft of latency measurement and reduction initiatives. In this issue alone, we detail NYSE Euronext’s deployment of Correlix to monitor data and order latency, Colt’s new proximity hosting center for accessing the London Stock Exchange, and new initiatives from network providers Algo Technologies, IPC and Spread Networks.
Achieving lower and more consistent latency has a host of benefits, but achieving it doesn’t come cheap. In fact, Paul Adcock, executive vice president of NYSE Euronext and head of trading and operations at NYSE Arca, says he was taken aback by some of the fees outlined by vendors when the exchange started looking for a latency monitoring platform.
And that doesn’t even take into account the costs of putting in place a high-performance infrastructure, let alone maintaining and renewing it to ensure it remains such—something that vendors such as Algo Technologies and Spread Networks hope will make them a pretty penny as firms desperate for latency improvements seek the lowest-latency connectivity to markets. Both vendors are expanding their offerings: Algo Tech has partnered with UK utility Scottish and Southern Energy’s telecoms subsidiary to broaden its network and make it quicker and easier to connect individual buildings across London, leveraging SSE’s existing network of pipes, while Spread—which made a splash last year by digging its own fiber trench between New Jersey and Chicago to create the lowest-latency route between the two—is applying its methodology to connections between individual datacenters within New Jersey, digging its own secret trench via a more direct route between Equinix’s NY4 datacenter and Verizon’s Carteret facility.
The increasing cost of investment required to get the most out of low-latency data may play into the hands of vendors like Colt and IPC, who have set up facilities in London and Singapore, respectively, to provide low-latency proximity access to the London Stock Exchange and Singapore Exchange. In Colt’s case, proximity hosting may appeal to many clients for whom co-locating at every venue is prohibitively expensive.
Yet, when it comes to content itself, real-time data is not seeing the same growth as other areas—these latency initiatives only deliver the same data, faster. In fact, the highest-growth areas (though much smaller in terms of overall revenues) are currently research and analytics, according to research from Burton-Taylor International Consulting, which sees these areas being driven by growth among investment banking and portfolio management groups rather than sales and trading desks.
Buy-side traders, on the other hand, cited high-frequency trading as the most important structural and regulatory issue, but are also anticipating a buy-side rebound in 2011, according to a report from research firm Tabb Group.
Latency may hold the crown for now, but is it merely a usurper who will be displaced once the cost of achieving reductions outweighs the gains, allowing the true king—content, of course—to reclaim its throne? Rather, like the politics of olde, the ruler of this new world will probably involve a marriage between different clans—speed, content and analytics that help interpret information better and faster than before—and vendors like Selerity, which is now parsing its machine-generated events feed for consumption by human traders via StockTwits (rather than only by algorithms) are leading the way into this cross-pollination.
But until then, with the industry still so focused on eking out short-term latency gains, I wonder whether we risk not seeing the forest for the fast-moving trees as we speed past in pursuit of the “nirvana” of light speed.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (point 2.4), printing is limited to a single copy.
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. As outlined in our terms and conditions, https://www.infopro-digital.com/terms-and-conditions/subscriptions/ (clause 2.4), an Authorised User may only make one copy of the materials for their own personal use. You must also comply with the restrictions in clause 2.5.
If you would like to purchase additional rights please email info@waterstechnology.com
More on Trading Tech
Bond tape hopefuls size up commercial risks as FCA finalizes tender
Consolidated tape bidders say the UK regulator is set to imminently publish crucial final details around technical specifications and data licensing arrangements for the finished infrastructure.
If M&A picks up, who’s on the auction block?
Waters Wrap: With projections that mergers and acquisitions are geared to pick back up in 2025, Anthony reads the tea leaves of 25 of this year’s deals to predict which vendors might be most valuable.
The Waters Cooler: A little crime never hurt nobody
Do you guys remember that 2006 Pitchfork review of Shine On by Jet?
Removal of Chevron spells t-r-o-u-b-l-e for the C-A-T
Citadel Securities and the American Securities Association are suing the SEC to limit the Consolidated Audit Trail, and their case may be aided by the removal of a key piece of the agency’s legislative power earlier this year.
After acquisitions, Exegy looks to consolidated offering for further gains
With Vela Trading Systems and Enyx now settled under one roof, the vendor’s strategy is to be a provider across the full trade lifecycle and flex its muscles in the world of FPGAs.
Enough with the ‘Bloomberg Killers’ already
Waters Wrap: Anthony interviews LSEG’s Dean Berry about the Workspace platform, and provides his own thoughts on how that platform and the Terminal have been portrayed over the last few months.
BofA deploys equities tech stack for e-FX
The bank is trying to get ahead of the pack with its new algo and e-FX offerings.
Pre- and post-trade TCA: Why does it matter?
How CP+ powers TCA to deliver real-time insights and improve trade performance in complex markets.