Financial markets today have become so dependent on well-designed technology architecture in support of growing automated trading business. I was recently part of a webinar centered on discovering how optimized latency performance, mitigation of microbursts, traffic filtering and analysis, and precise timing and synchronization are beneficial to all participants in the trading value chain.
The webinar was hosted by Wall Street & Technology, entitled, “Enabling High-Performance Trading Alpha: Beyond Low-Latency to Sustained Performance.” If you weren’t able to make it, register here to view a recording.
During the discussion, I was joined by some great minds in the financial services sector including Alex Tabb, Partner, TABB Group and Paul Jameson, Senior Director, Financial Services, Cisco. We discussed how high-performance trading fabric architecture and innovations like Cisco Algo Boost and the Cisco Nexus 3548 can help financial firms address challenges and capture opportunities in today’s financial markets. Here are a few key take-aways from the webinar I would like to highlight.
Financial trends and dynamics taking place in the market
As most of you know, last year was a challenging year for the equity markets here in the U.S. and Europe. Since May of 2007, mutual fund investors have been heading for the exits – U.S. equity mutual funds have bled assets, totaling approximately $580 billion from January 2007.
The good news is, however, that those same assets leaving U.S. mutual funds were moving to Exchange-Traded Funds (ETF). The past three years have shown substantial growth and will continue to grow into the future. The equities market is gaining more interest now in 2013, while high frequency trading takes more of a stage in global markets.
Actual market volumes are worse than predicted and expectations for improvement could be challenging. Volumes and commissions have seen three years of sequential decline, but we remain hopeful for 2013. Capturing liquidity is essential in today’s marketplace for various participants, as competition is increasing in the global marketplace.
Current challenges with optimizing electronic trading, today and tomorrow
Some challenges have remained among investment firms, and while competition increases among these firms, many are searching for answers to the following questions:
- How can I be faster than the competition?
- How can I increase order flow/liquidity?
- How can I improve risk management?
- How do I accelerate price discovery?
- How can I capture opportunities during periods of volatility?
Deploying a high-performance trading fabric and Cisco’s investment strategy
Cisco’s High-Performance Trading Fabric architecture is helping trading firms overcome challenges and gain visibility and manageability to positively impact business performance. Trading today not only requires speed, but also requires the intelligence to trade smarter. Algo Boost, the foundation of Cisco’s High-Performance Trading Fabric, is leading the industry in performance and functionality.
Below I’ve highlighted the key features that Algo Boost provides:
- Lowest latency with warp mode
- Active buffer monitoring proactively monitors and alerts congestion
- Network Address Translation (NAT) without latency penalty
- Precision time synchronization optimizing trading strategy execution
- Intelligent traffic mirroring for better performance analysis
Through Algo Boost’s active buffer monitoring feature, firms will be able to detect microbursts that cause congestion and increase latency. This granular monitoring of the queuing structure allows the capability to build event based triggers at nanosecond levels. This enables firms to dynamically modify trading strategies on an ongoing basis to maximize the ability to capture opportunities, as volatility and fluctuations increase in the market. Monitoring tools can also leverage this data for customize reporting and troubleshooting analysis as to why certain market data ticks, trades, etc. were experiencing delay, or simply dropped.
It is Cisco’s goal to continue to help our clients trade smarter and extract intelligence out of the fabric for higher performance and enable better decision making. Keep an eye out for upcoming enhancements to the Cisco high-performance trading fabric throughout the year.