Shared Services Expands Reach
Capital markets firms can benefit from shared-services infrastructure that provides the benefits of high-speed trading without cumbersome investments in networking and computing. Although the concept of shared services isn’t new, it’s beginning to make inroads into the core trading and risk management systems used by financial institutions.
Thesys Technologies, for example, the infrastructure affiliate of Tradeworx, services the high-performance technology needs of institutional investors, professional traders, brokerage firms, exchanges, and regulatory agencies. Founded in 2009, Thesys Technologies’ technology handles over 5% of the daily volume in U.S. and Canadian equities.
“In order to trade the equities markets effectively, you need to invest more money into infrastructure to transmit more market data and to have the lowest latency between facilities, including potentially the use of microwave and extremely expensive fiber routes,” Mike Beller, chief technology officer of Tradeworx and managing partner of Thesys Technologies, told Markets Media.
The financial sector is being buffeted by the need for carrier-grade connectivity, which requires an extensive investment in infrastructure, and other R&D investments, at the same time that their IT budgets are being trimmed in order to rationalize their cost structures.
“Finance has always paid for network, compute, and storage innovations, but we are in a save money cycle, so the idea of reducing costs in the same manner as network service providers is taking hold,” said Dr. Jock Percy, CEO of Perseus Telecom. “The primary footprints all look the same. All individual companies’ topologies look just like network services topologies, so there’s no point in replicating the infrastructure that’s already been built.”
Jake Loveless, CEO of Lucera Financial Infrastructures, said: “You go through years of pain, which means budget cuts, less money on R&D, and yet the world is more complicated today than it was four years ago. If you look at things from a systems level, from an operational and risk perspective, assets are more connected today. So the problem is harder and you have less money.”
Lucera Financial Infrastructures has launched a platform called LumeFX intended to provide rapid connectivity to the FX spot market. Cantor Fitzgerald has been using the system for about a year and a half. According to Loveless, Cantor is running its entire FX desk in production on LumeFX. LumeFX and Lucera manage all the infrastructure and networking, enabling Cantor to focus on optimizing order flow.
“Rigid technology architectures lead to time-consuming and costly deployment cycles,” said Loveless. “We’re an on-demand infrastructure, which means you can manage operational complexity, adjust trading strategies, and use the infrastructure you require at any point in time. When you get shared services, you get rapid innovation. You could not have Netflix if you didn’t have carrier-grade connectivity.”
Tradeworx also provides Big Data analytics for finance and has provided a platform called MIDAS to the SEC to help it monitor the markets, said Beller.
“This huge amount of data that’s being collected and transmitted at all these co-location centers was overwhelming the regulators, and they didn’t have the appropriate tools to visualize that data,” he said. “We provide it to them, and as a result, the SEC is finally getting the ability to be on top of what’s going on.”
Featured image via mborchert/Dollar Photo Club
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