Westborough, MA & New York, NY, October 26, 2005 â In todayâs extremely competitive, complex and hyper-fast environment requiring financial market participants to change and adapt quickly, firms are being forced to rethink the way they develop, deliver and connect to their clients. And according to "Financial Connectivity: Creating a Frictionless Global Marketplace", the new industry report released today by TABB Group, "secure, reliable, high-speed, low-latency shared connectivity is the future of financial markets communications."
At a time when milliseconds, visibility, bandwidth and accuracy matter, within the global securities ecosystem, connectivity has become so integral to the investment process today that there wouldnât be an industry, a market, a payment mechanism, a clearing facility, market data or even a way to communicate with clients without it, writes Donna Miskin, co-author with Larry Tabb, CEO, TABB Group.
With 69% of institutional US equity order flow currently communicated electronically and projected to rise to nearly 80% in 2007, TABB Group estimates that electronically routed buy-side orders will increase from 1.2 billion shares a day in 2004 to more than 3.1 billion shares in 2007, an increase that doesnât take into consideration the adoption of the NYSE Hybrid market," Miskin adds, "By some estimates, this could double or triple listed volumes and further accelerate the move away from traditional channels."
The report explains that in a more efficient, shared-network, or extranet, environment, each network participant is connected by one logical connection. When provisioned, each participant can communicate bilaterally, greatly reducing the number of connections. In addition to simplifying the network infrastructure, once the extranet gains scale and the benefits of the "network effect" kick in, the networkâs value increases exponentially as the number of brokers, clients, data providers, execution venues and service providers on the network increase, the ease and speed of connecting to that provider increases, as does the network utility. "The network," Miskin points out, "becomes a firmâs single connection to the world."
"As networks consolidate and membership grows, the ability to connect, communicate and easily obtain and integrate virtually all services through a centrally-hosted connectivity provider will not only increase the value proposition of financial extranets, it will make connecting in virtually any other way almost obsolete," Tabb concludes.
The report also discusses the challenges, opportunities, advantages and disadvantages of shared connectivity; differences between in-network and on-network services (market data and datafeeds, Web Services, execution and clearing, metrics, hosting and shared infrastructures, self-provisioning and pre-integrated components, TCA and VoIP); "do-it-yourself (DIY) versus surrendering control to another party; key drivers, including FIX, electronic trading, cost reduction, MiFID and business continuity; and solutions from the nine leading providers: BT Radianz, Sector/SIAC/SFTI and Transaction Network Services (TNS) extranets; and Charles River Network, Macgregor MFN, NYFIX, Savvis, SunGard STN and SWIFT VPNs.