Pushing the Envelope: Redefining Real-time Transaction Processing in Financial Markets

How fast is real time? That is like asking the question how fast is fast? When we think of real time we think of immediate. But what constitutes immediate? Is it now? Most certainly. But is real time 30 seconds from now, how about 3 seconds, or, 3 hundredths of a second from now?

As the markets speed up the need for real-time transaction processing also increases. The speed of this financial information transition is outpacing anyone’s forecast. Financial engineering, FIX connectivity, algorithmic trading, and black box models are dramatically changing the way that sophisticated traders and market participants are addressing the markets as lower costs and higher compute and networking speeds are enabling the creation of automated model-based trading. These models are analyzing the market on a microsecond basis, trying to gauge liquidity and seek opportunity. As the models become more accepted, their use increases the velocity of the market and forces other participants to leverage them, as the pace of trading becomes too fast to manage by hand.

Increasing transaction and data speeds are having a major impact on the industry. The increases are forcing firms to significantly invest in their trading and processing infrastructure. As speeds increase, market data infrastructures will be the first to sag. Current market data architectures were not built to manage this overwhelming volume. Concurrent with data architecture investment will be investments to processing systems relying on or tangential to the trading process, such as order management and order routing technology.

To support these applications and the drive for enhanced real-time transaction processing, we will need investments in underlying infrastructure such as faster servers, enhanced networking technology, better and more robust storage, and a more focused set of data management tools.

While the limit for real-time transaction processing seems limitless, the challenge will be applying these technologies in a more cost conscious environment, swapping decentralized for centralized, high cost for low cost, batch for real time, and big iron for small. As these changes occur, the one thing that seems clear as the need for enhanced real-time processing is the need to maintain a low cost infrastructure. Although real-time processing enables firms to capture opportunities, it also lowers margins, cost structures and competitive barriers. This all but guarantees a price war and accelerated competition, and drives further what has become the insatiable need for speed but at increasingly competitive prices.

The Tabb Group Report on the Redefining Real Time Transaction Processing in Financial Markets

This research report analyzes major financial markets business drivers such as electronic and algorithmic trading, new trading partners, and real-time risk and their impact on the real-time transaction processing and data management infrastructure.