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May 2008
Low Latency – Time is Money
There has always been good reason to get excited about low latency. It is the Formula One of IT – the stage upon which IT vendors showcase the state of the art, where trading teams vie to attract elite engineering talent, and all compete against the speed of light. Dedicated hardware, top-secret software and single-purpose laboratories have been the order of the day.
It’s already an unbelievably high-stakes race – with $100m per year per millisecond of performance improvement, by some counts. Now, a number of factors are combining to make this historically niche activity even more important, with huge implications not only for banking but also the wider world of corporate IT and mainstream technology vendors.
This report examines the existing low-latency market, investigating the forces of change and consequences for all involved. It looks at low latency from both a business and technology perspective, and aims to provide insight not only for those involved in building and using high-performance trading systems in the financial markets, but also the vendors of the various components of those systems.
Compliance, deregulation, automated trading, a tsunami of market data, multicore processors and a host of other elements are driving significant change in financial architectures, which in turn present emerging opportunities for a widening cadre of vendors.
The traditional trading market for low latency is growing, which invites new participants. Simultaneously, low-latency techniques are becoming applicable to new markets. Low-latency techniques are having implications for any vendors with real-time aspirations, those who have to deal with high workloads, or those who are involved in Web-scale computing.
Message acceleration, multicore processors, solid-state disk storage, real-time business intelligence and analytics, and specialized FPGA and PCI/cards have always been involved in the low-latency game. Now there are opportunities (and threats) for all types of vendors, including post-relational database companies, middleware and messaging vendors of all kinds, storage and network equipment suppliers, infrastructure management companies, and even software tool and development companies.
The battle to reduce latency will not only shape the banking landscape, but will have significant implications for other markets and the vendors that supply them.
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