How Fast Is Fast Enough?
Posted by Dan Hubscher
When thinking about technology and speed, the usual issue that springs to mind is how fast a transaction can take place. Gone already are the days when every millisecond mattered; now we count in microseconds. Or nanoseconds. And debates already rage about the possibility of picoseconds, as if that’s all that matters. Regardless of where you fall on the low latency spectrum, you can’t ignore the other side of speed – rapid customization.
A new trading idea may work on the microsecond timescale, or nanosecond, or wherever the realistic limit is for any particular firm. But the idea won’t be unique for long. The question is, then, how to deploy that idea to the market first? Specifically, how quickly can a new technology itself be implemented? How quickly can a trading strategy be modified – the first time, the second time, the fifteenth time, to suit new market opportunities as they emerge? How quickly can the expression of a trader’s intellectual property start delivering operational benefits and competitive advantage? And, how quickly is that advantage eroded by others who are similarly responsive?
The customization frontier of algorithmic trading competition is especially pertinent when new regulatory measures are announced. Today’s traders face dramatic change across asset classes and geographical boundaries. Those who can implement compliant strategies the fastest not only stay on the right side of the law, but can attract new business by entering new markets ahead of the competition.
TradeTech 2011 starts tomorrow in London. There, technology providers, market operators, and market participants will meet to discuss the latest and greatest developments in our industry. The first question from buyers is always ‘how fast?’ instead of ‘how much.’ But as pent-up demand starts to accelerate, as budget starts to be released for new technology projects, traders and CIOs alike need to know their new ideas can be executed quickly. The necessity is more than just quick return on investment; it is also getting ahead of rivals. Urgency is the modus operandi.
To meet this need, businesses need two kinds of responsiveness. The ability to respond to opportunities in real-time is imperative. But, businesses also need agility ‘built in’ to their technical infrastructure. With new rules being laid out in both the US and Europe, buying something that was pre-defined in a previous era and closed to further change won’t work as deadlines draw closer. Agility will become the watch-word of purchasing decisions – and, undoubtedly, a major theme of conversations at TradeTech this week.