Speed will continue to be the name of the game for US equity brokers but according to a new study published today by TABB Group, “US Equity Technology 2010: The Sell Side Perspective,” business demands beyond latency in 2010 may outpace their trading technology budgets.
CIOs, CTOs and heads of technology tell TABB that in addition to meeting increased latency reduction requirements, they are being asked to expand network capacity, make more efficient use of data center space – nearly half are now consolidating or migrating data centers – and, because the average bulge bracket broker spends nearly $30 million annually on excess compute power, increase utilization of their share of the 93,000 sell-side servers running their US equities businesses.
According to TABB Group’s Kevin McPartland, senior analyst and the study’s author, the infrastructure bar for US equities brokers is being set higher every day. “Today, the optimal infrastructure is more crucial than ever before, requiring the ability to operate more efficiently than your competitors.”
McPartland says that because a completely virtualized and highly utilized infrastructure is still years away for sell-side equities technology – 80% of the bulge-bracket firms are using server virtualization but its use for trading applications is unlikely due to the latency penalty – a large gap exists between what is currently possible and actually done. In that same vein, cloud computing will be a part equity IT strategies going forward, but security concerns leave it more interesting than useful.
Today, many sell-side firms are still fighting to keep up with bandwidth requirements coming from exchanges and market data providers. “It’s not a matter of more efficient utilization of bandwidth,” says McPartland, “but simply having enough. In fact, availability of bandwidth stands out as the biggest game changer, allowing new market participants to compete with the incumbents, new trading strategies to be born and information to flow more efficiently than anyone thought possible.”
Only a few years ago, becoming better and faster required silicon and fiber optics rather than charts and speed dials,” says McPartland, “but it’s only now that embracing efficiency has also become an essential part of trading equities profitably. Going forward, he adds, “Operating data centers, servers and networks with the utmost efficiency will not be a trend but the only way to do business. In 2010, the winning brokers will be those that not only have the latest and greatest technology, but can manage it most efficiently.”
Other key findings from the study include:
Networking:- Upgrades were the top infrastructure projects for the sell side in 2009 with reliability and latency reduction the leading concerns for managers.
- Although the switch to 10 gigabit Ethernet (10GE) instead of InfiniBand is underway with over 50% of firms partially converted or in planning to do so, TABB does not believe this signifies a slow death for InfiniBand.
- Cost and exchange proximity are the two primary drivers for sell side selection of a data center.
- Over 60% now measure compute power utilization in their data center.
- Use of four-socket servers will increase in 2010 as next-gen servers and chips provide the value, performance and ease of integration that allows for more widespread adoption.
- 30% of the firms currently use solid-state disks with an additional 40% considering their use.
- Only 33% of the bulge-brackets have broken down the walls between product-aligned IT teams, moving away from the traditional silo approach.
The study, which McPartland discusses in a video presentation available at http://www.youtube.com/watch?v=lyVyJD2vXdM, is based on one-to-one interviews with CIOs, CTOs and heads of technology at 24 sell-side firms with bulge-bracket firms accounting for 25% of the participants (equal to two thirds of all bulge bracket firms). Discussions covered usage and game-changing trends related to data centers, servers, server usage by brand, CPUs, operating systems, collocation, networking, hardware acceleration, virtualization, cloud computing, outsourcing and IT organizational structure. The research and analysis also covers the top 11 infrastructure projects, expansion plans for 2010, methods for expanding while under budget constraints and key decision-drivers when purchasing new technology.
The 59-page study with 66 exhibits is available now for download by TABB Group Equity 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.
