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Brains vs. Brawn?

After years of working with financial markets firms around the globe I believe we are heading towards an environment where “High-intelligence trading” will likely replace “High-frequency trading”.  Why, because low-latency is becoming table stakes in the search for competitive differentiation. A firm’s business advantage is going to be in the ability to operate on a global scale and process more complex information sets.  So in today’s markets, it’s not just speed — but span of awareness that counts -- in a search for Alpha. How do firms evolve to  “high-intelligence trading” infrastructure ?  

  • From an infrastructure point of view the first goal is to establish a global footprint and do that in an efficient way.   You need to strategically position critical trading infrastructure in order to leverage new and emerging trading ecosystems. As an example, you can establish a footprint in multiple data centers around the world provided by a cloud service provider, while avoiding the capital intensive data center build out costs. These are hubs of liquidity  for multiple markets, where content providers create communities of interest. 
  • Secondly, you need to be able to forecast new high water marks caused by market data surges and be able to adjust your capacity accordingly, without breaking the bank. This is possible because of the intelligence built-into the trading infrastructure linked to your trading strategy.
  • Third is the ability to cross borders: between geographies and between asset classes.

Cisco is investing heavily to enable these three capabilities to establish what we call a “High performance trading fabric”. The end result is a scalable, reliable, deterministic, trading infrastructure that delivers trading services seamlessly on a global scale. This opens the door for new strategies, based on correlation of global events and awareness of global risk. 

What do you think?  I welcome your feedback and encourage you to participate in the discussion.

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