US equity broker business demands to outpace budgets, says Tabb
Speed will continue to be the name of the game for US equity brokers, a study published by Tabb Group has found that business demands beyond latency in 2010 may outpace trading technology budgets.
Chief information officers, chief technology officers and heads of technology say that in addition to meeting increased latency reduction requirements, they are being asked to expand network capacity, make more efficient use of data centre space and increase the use of their share of the 93,000 sell-side servers running their US equities businesses.
According to Tabb Group’s Kevin McPartland, senior analyst and the study’s author, the infrastructure bar for US equities brokers is being set higher every day.
“Today, the optimal infrastructure is more crucial than ever before, requiring the ability to operate more efficiently than your competitors.”
McPartland says that because a completely virtualized and highly utilized infrastructure is still years away for sell-side equities technology – 80 per cent of the bulge-bracket firms are using server virtualization but its use for trading applications is unlikely due to the latency penalty – a large gap exists between what is currently possible and actually done. In that same vein, cloud computing will be a part equity IT strategies going forward, but security concerns leave it more interesting than useful.
Today, many sell-side firms are still fighting to keep up with bandwidth requirements coming from exchanges and market data providers.
“It’s not a matter of more efficient utilization of bandwidth,” says McPartland, “but simply having enough. In fact, availability of bandwidth stands out as the biggest game changer, allowing new market participants to compete with the incumbents, new trading strategies to be born and information to flow more efficiently than anyone thought possible.”
McPartland says that going forward operating data centres, servers and networks with the utmost efficiency will not be the only way to do business.
“In 2010, the winning brokers will be those that not only have the latest and greatest technology, but can manage it most efficiently.”