The Evolution Of Smarter Trading

For several years, trading firms, brokerages and exchanges have been engaged in a “race to zero” – a singular focus on competing by reducing the latency of executing financial transactions. The accepted wisdom was to win by being first to market. To that end, market participants competed by investing huge sums in the latest IT, installing the fastest servers and data fabrics, in deploying shortest-path fiber networks, or where possible locating their trading systems as physically close to exchange matching engines in expensive co-location data centers. As the latency of trading was pushed down from milliseconds to microseconds, the competition to be the fastest fuelled a “low latency arms race.” In this research note we look at what it means to be smart in the trading environment.

Today, for many trading firms, that race is essentially concluded. In his Tabb Group focus note; ‘Intelligence Trumps Speed in the New Markets’ (May 2014), Paul Rowady refers to a single, overarching megatrend in capital markets: from faster to smarter. He contrasts the prevailing technology priorities of big data, cloud (or managed services), mobility and in-memory storage, with the apparent decline of the previously ubiquitous low latency theme.

Learn more – download our special report on The Evolution of Smarter Trading today.

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