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The High Frequency Game Changer: How Automated Trading Strategies Have Revolutionized the Markets by Sang Lee, Paul Zubulake

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Chapter 7

Positives and Possibilities

Aite Group estimates that trading firms spent more than US$1.3 billion on electronic trading infrastructures in 2010. The challenge of executing trades across multiple liquidity points in milliseconds is easy to discuss and difficult to implement. It takes innovation, and that innovation drives new technology into the market at large. Consider some of the technological innovations driven from low latency trading demands:

  • Complex event processing. This technology gained commercial prominence through algorithmic trading. Now, telecommunications companies use it for switch routing and banks use it for fraud detection. That one component of a low latency trading infrastructure represented a more than US$40 million technology investment last year, and is headed into the mainstream in the next generation architecture discussions.
  • High-performance messaging middleware. Aite Group estimates that capital markets firms spent about US$220 million on messaging middleware associated with electronic trading in 2010. While firms like TIBCO and IBM capture the majority of this market, disruptive technologies by upstarts have carved out a niche, forcing latent large players to start innovating again.
  • Hardware acceleration. Right now, capital market firms are investing in the next generation of hardware platforms. Technology companies are creating new methods for writing software directly to processing cards and bypassing input/output (I/O) limitations to ...

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