Speed vs. Need to Save - TABB
According to new research from TABB Group, a battle is brewing within today’s institutional investment market data marketplace. The “need for speed” is in direct conflict with the “need to save” as cost versus performance becomes an issue for many of today’s largest market data users.
While there is no doubt that speed is important in trading today’s equity markets, market participants need to ensure that their investment in speed gets them more than just a solitary solution for a single platform, explains Alexander Tabb, a TABB partner and author of the report, “Market Data Acceleration: More than Just Speed.” “This is where the question of hardware acceleration versus software acceleration comes into play and which solutions provide the greatest bang for your buck. It’s also why the demand for market data acceleration is driving the global investment in sell-side, market-data distribution technology in 2012 to $3.6 billion.”
Regionally, the largest investment, 73%, will come from Europe and North America, but according to TABB Group, there’s considerable growth potential from the Asian markets as they continue their march towards automation with a need for high-speed ticker plants and high-speed market-data distribution systems. In terms of asset class trading, “Our research indicates that while the equities markets are matured from a growth perspective, driving 45% of the global spend, a strong percentage of growth will come from over-the-counter (OTC) derivatives, FX and commodities,” Tabb adds.
Although speed is the primary motivator for investing in market data acceleration technology, it’s neither the only defining characteristic nor the only important factor. In today’s cost constrained environment, where participants are trying to rein in costs, historically dominate technologies, such as FPGA powered solutions are being challenged by newer, software enabled technologies that leverage lower cost commodity compute capabilities to provide fast and dynamically more scalable solutions to the market.
As Tabb explains, it’s more than just naked speed, in terms of messages per second, pointing out that as Occam’s Razor states in a world where all things are equal, the simplest solution is often the correct answer. ”Different firms have different strategies, thus different needs, Whether you’re at high frequency trading firm, an institutional market maker, a prop trading firm or on an algo trading desk, the challenge is placing speed into its proper context within the accelerated market data equation. Due to the democratization of speed, it’s essential for every buyer to remember to factor in total cost of ownership, price versus performance, operational flexibility, control, scalability and time-to-market.”
The 20-page, nine-exhibit report is based upon in-depth discussions with equity and derivatives market participants from the buy-side and sell-side as well as interviews with market-data acceleration vendors and technologists. The report examines the impact of regulatory reform on speed, market-data acceleration technology that firms are buying, vendor solutions and the global market-data acceleration landscape with an eye towards identifying areas of growth within the next three years.
“Market-data acceleration solutions are finding their way out of the high-speed, ultra-low latency marketplace, migrating across the industry,” says Tabb. “These solutions are enabling firms to take full advantage of new technologies and methodologies to disseminate market data with minimal latency across a wide spectrum of users.”
The report is available for download by TABB Group Research Alliance clients and pre-qualified media at https://www.tabbgroup.com/Login.aspx. For an executive summary or to purchase the report, visit http://www.tabbgroup.com or write to info@tabbgroup.com.
