Sometimes we want something just because it’s there. The latest gadget, a newly-introduced super-premium level of service or, if you’re Veruca Salt going round Willy Wonka’s chocolate factory, a golden goose. We want it, but we may not need it.
In the world of financial trading speed is crucial. And, as the globalisation of financial markets increasingly stretches the distances involved, demand for infrastructure that can offer ever-lower latency spirals. It’s predicted that a round-trip trade between London and New York will take a mere 59 milliseconds next year; even more impressive when you consider that the same trip travelling at the speed of light takes 45 milliseconds.
Trading-technology providers are investing in long-distance telecommunications such as fibre-optic cable, satellite and microwave with the aim of providing near-instantaneous trading across time zones and continents.
For example, US companies are investing in fibre; a new transatlantic fibre-optic cable network costing $300million is being laid now, making the upgrade schemes also taking place seem a bargain at a mere $35million a go.
There’s also strong growth in the role of data centres as the venues where most transactions are executed. And, again, there are cases of huge investment; Google owns a data facility that takes up an entire city block in Manhattan; worth approximately $2billion, it’s said to be one of the world’s most wired buildings. This giant data centre’s purpose is to connect entities: carriers to financial institutions; financial organisations with exchanges; companies with companies on a global scale.
So it’s all possible, but is it always necessary? Do you really need a golden goose?
Here Chris Pickles, Head of Industry Initiatives at BT Global Banking & Financial Markets, steps in to put things in perspective, “We shouldn’t forget that the majority of investment firms and exchanges are not in the low-latency race that the major investment banks and brokers run in.
“Solutions like satellite and retail broadband can be the most appropriate solutions for many market participants and, in particular, in geographies that have a very limited communications infrastructure.”
In many cases, reducing latency can be best achieved by minimising the physical distance between the network elements involved in a trade — and here, hosted or cloud-based technologies, can be ideal, giving evergreen technology in an economies-of-scale environment.
There is conflict between the need for high-end infrastructure solutions and the absolute requirement to get the most out of resources, but there are also cost-effective alternatives to significant capital investment.
You don’t need your own satellite or a golden goose to meet your trading latency requirements. So put down the oompa loompa and expand your thinking horizons instead.
Chris’s quotes also appear in the latest issue of Markets Media magazine in the context of a survey of the state of the long-haul market.