Sell-Side Electronic Trading:
Industry Reacts to New Generation of Hackers | A New Way to Attack Market Data Costs | The Hidden Cost of Trading | In Fixed Income, FIX Is a Post-trade Solution | Algorithms Multiply to Match Trading Strategies |
The Long Revolution in Trading
November 21, 2006
When in the midst of change and upheaval, it's difficult to define precisely what constitutes a revolution in any area of society, business or technology. It's easier when people agree that they know one when they see one--at least until history confirms or denies it.
By that standard, a revolution in securities trading has been escalating for the better part of a decade. In the late 1990s this was one of many industries and business lines touched and transformed by Internet technology, but in retrospect, it was just a hint of what came later. Some elements of the securities industry's pre-2000 technological awakening--self-directed investing, electronic communications networks, direct-market access and cross-border, multistrategy and black-box trading--are visible, even mature aspects of the industry today. But these, combined with more recent and contemporary developments, add up to a new, transformational explosion in market structures and trading operations that may be looked back on, in ten years, as just another turning point, as 1996-1997 appears to us today.
It's the mission of Securities Industry News to chronicle the current events--in online Breaking News reports, in the weekly newspaper and in special reports and supplements like this one in which we take a step back from day-to-day developments and try to grasp the bigger picture. In this supplement we look mainly at the new paradigms on the sell side, one in a series of in-depth examinations of automated trading developments that this year began with a buy-side-focused report on Feb. 13. Of course, one lesson from this round of evolution is that the traditional lines that differentiated and separated brokerages from their fund-managing clients are blurring, historically distinct technological platforms are becoming more closely integrated, and even front and back offices are, if not yet as tightly integrated as they need to be, recognizing each other's interdependence.
Though taking off from a sell-side perspective, the articles herein necessarily also cover connectivity to the buy side, the latter's increasing insistence on control over execution strategy and cost, and how the sell side is responding to those demands. Algorithmic trading, which, along with hedge funds, is often invoked as the catalyst for the revolution--if not as the revolution itself--gets its due in the two lead features, but it's also clear that algos are but one piece of the puzzle that both sell and buy side are piecing together. It's a global, multi-asset-class investment world, and when it comes to cross-border trading technology, everybody from exchanges to investment banks to independent software developers is jockeying for position, while also having to heed deficiencies in the legacy infrastructure.
Consider this another taking-off point for SIN's coverage of the e-trading landscape as we look toward 2007 and beyond. Aite Group of Boston estimates that algorithmic trading, now close to 33 percent of U.S. equities trading, will reach 53 percent by 2010. Yet that's only part of the story.
