Wall Street's need for speed in spotlight at SIFMA Conference

Securities trading in the financial-services industry is increasingly becoming a race to be the fastest to electronically complete a deal between buyer and seller, driving the adoption of automated trading and a demand for ever-higher network speeds.

With that in mind, a group of high-tech vendors at the Securities Industry and Financial Markets Association’s (SIFMA) 2007 Technology Management Conference and Exhibit on Tuesday plans to unveil their latest products and services designed to address Wall Street’s ravenous need for speed in an era when a few milliseconds can mean winning or losing millions.

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In their own bid for victory, Voltaire, Intel and HP have joined forces with Reuters, which provides the financial-services industry with its Reuters Market Data System, to come up with a high-speed, low-latency network architecture they claim traders should adopt. RMDS is installed at about 2,500 financial-services firms.

“Speed is the key to competitive advantage, whether it’s from the trading desk or automated,” said Anne Ambrose, HP's director of brokerage trading. “Otherwise, you won’t be able to participate in the trade.”

Reuters business manager Nicolas Pintart said his company worked to ensure the RMDS middleware, which analyzes market data as it’s flowing from various financial and news sources, has been optimized to work in combination with Voltaire’s 10-20Gpbs Grid Director InfiniBand-based switches and Remote Direct Access Memory technology, HP ProLiant BladeSystem c-Class servers, Intel’s Quad Core Xeon 3500 processors.

Patrick Guay, senior vice president of marketing at Voltaire, said the collaborators started a year ago to engineer an architecture for the financial-services industry.

Nigel Woodward, director of financial-services solutions marketing at Intel, added the technology model that HP, Intel, Reuters and Voltaire devised is presented as an approach that financial services can adopt without having to go through extensive engineering analysis on their own.

Tom Price, senior research analyst at TowerGroup’s Securities and Investment Practice based in Needham, Mass., notes that Bloomberg, Reuters and Thomson Financial (which is in the process of acquiring Reuters) compete to take feeds from stock-exchange and news sources and sell that data to brokers and dealers.

He pointed out that the financial-services industry is becoming increasingly dependent on automated trading — known in the industry as algorithmic trading or simply “algo trading” — to complete trades. In fact, machine-to-machine algo trading is generally assumed to account for about 60% of electronic trading.

“Basically, you have parallel infrastructures today,” said Price. “One is humans trading, the other is machines trading.”

Price said that algo trading relies on computer applications to make buying decisions based on complex programs built around algorithmic logic, and it was pioneered by firms such as Goldman Sachs, Merrill Lynch and Morgan Stanley as far back as a decade ago. Today it’s become the industry’s driver, with hedge-fund activity believed to rely primarily on machine-based algo trading.