SOA Talk

Oct 18 2012   2:35PM GMT

High-speed trading: Time to take a breath?

Jack Vaughan Jack Vaughan Profile: Jack Vaughan

Low-latency messaging, complex event processing, big data, operational business intelligence and other high-powered technologies must be considered by IT leaders looking to achieve competitive edge. But most IT leaders know such systems come at a price, and they must be subjected to the same ROI considerations any other business effort must endure.

When you see a competitor succeed using low-latency middleware technology, it is a bit easier to see your ultimate decision – still you have to be wary of an arms race that could leave you holding the proverbial bag. Wall Street financial giants have set the tone for some of the most startling middleware advances of the last 20 years, but most other industries have been a bit more cautious in entering the race to real time.

You may want to deliberate on some of the latest news out of Wall Street as you seek to measure what “the real-time enterprise” means to your business.

The case in point comes by way of a recent New York Times’ article entitled “High-Speed Trading No Longer Hurtling Forward.” It indicates that some so-called high-frequency trading firms are finding it harder to make a good living – it was never really an easy living. In fact some high-speed traders are finding the cost of one less millisecond or one last foot of speed may not bring the payback to make its cost worthwhile.

Low latency trade technology has garnered attention before. A snafu in a rushed software update was central to sudden catastrophic losses that caused one firm to quickly put itself up for sale just a few months ago.  That serves as a backdrop to the latest news.

“High-Speed Trading No Longer Hurtling Forward” suggests that high-speed traders are beginning to represent a declining percentage of stock market trades. There are reasons. The most pointed one is a  drop in trading volume on stocks. That has made it harder to make profits merely by being the fastest to shift assets.

Folklore grew up around high-speed trading. Like the best technology, it seems to have an element of magic. It is not possible to say with assurance that it has come down to earth for good. But, with changed conditions – lower trading volume and reduced volatility – the fast, middleware-savvy trading crew may have to hunker down a bit.

Wall Street has driven advances, and, certainly promising real-time middleware is coming from other areas as well. In every case, its technology promise must be measured against cost and return.  – Jack Vaughan

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