Rewriting the Rules for Financial Trading Infrastructure: Learning a New Rule Book

John Knuff

<<<>>>>

By John Knuff (Part 2 in an 8-part series)

<<<>>>>
Traditionally trading algorithms operated from a single location as a single process reacting to price feeds and other events. Now, as markets and asset classes fragment into a globalized market fabric, speed and competition have put the squeeze on trading performance.

Not everyone can be the fastest, so smart traders everywhere are broadening their strategies and splitting up trading intelligence in order to leverage diverse third-party resources and track liquidity more nimbly, as it shifts from one venue to another.

Distributed trading, or M2M 2.0, requires firms to apply a new set of rules to optimize cost while drawing on an ever-widening range of data sources, cross asset opportunities and supply chain skills. Trading strategies can thus exploit both in-house and outsourced algorithms as a straight through, data-driven process, with each node positioned at the right place and time.

Such algorithms may be colocated with markets, data sources, customers or suppliers to optimize the supply chain. HFT traders, faced with tough competition and escalating costs, are leading this move to co-located operations, especially with network neutral data centers.

Network neutrality simply brings greater choice and finer competitive prices when compared to telco based hosting centers. However, markets, sell side firms and other e-services vendors offering data, analytics or other real-time, on demand services are not far behind, while even low frequency traders and post trade utilities too are beginning to appreciate the cost and agility benefits of distribution.

The drivers of M2M 2.0, the new rules for managing infrastructure TCO and the key role of network neutral data centers are all analyzed below as a five-stage process:

  1. Going with the flow
  2. Reconstructing the value chain
  3. Architecting for speed and/or agility
  4. Optimizing space and time
  5. Integrating the back office into the front office

The technology concepts of cloud computing, component outsourcing and ‘Software as a Service’ (SaaS) are proving powerful tools to facilitate both M2M 2.0 and trader agility.

The landscape of the global financial communty has been transformed.

Growing demand for European carrier neutral collocation. Source: IDC

<<<>>>>

Coming Up in Part 3: Going with the Flow

The pace of change keeps accelerating and agility demands non-stop adaption.
<<<>>>>

About Equinix in the Global Financial Markets

Equinix, Inc. (NASDAQ: EQIX) provides global data center services that ensure the vitality of machine-to-machine e-commerce. Some 400+ buy- and sell-side firms have come to value the agility that our network-rich International Business Exchange™ (IBX®) data centers now provide by operating across 38 markets in 12 countries on five continents, including all of the world’s top financial centers. From New York to London or from São Paulo to Singapore, Platform Equinix contains the world’s most robust and mature financial ecosystem with 99.9999% uptime.
Our community includes 60+ innovative trading platforms like Chi-X, EBS, SIX Swiss Exchange, Deutsche Börse and Bloomberg, 150+ financial e-services providers and 680+ networks. These networks in turn link through to thousands of other firms or markets to form a global ecosystem offering fast scalability and customized service across today’s diverse and uncertain global financial system.

<<<>>>>

Learn more at: www.equinix.com/industries/financial-exchange/

<<<>>>>
<<<>>>>