TABB Group, in a new research report released today, âFaster than a Speeding Bullet: The New, Low-Latency Messaging,â written by senior research analyst Kevin McPartland, believes that the messaging solutions that will have the most success are the ones that can maintain their high levels of throughput on the highest volume days.
âMany investment banks plan to double if not triple their budgets, driven by the need to capture every possible profit opportunity in the hyper-competitive trading markets,â says McPartland, adding, âThis vote of confidence from major sell-side institutions will likely lead to smaller shops following suit in an effort to provide a significant value-added service sought after buy-side clients.
Based on interviews with buy-side and sell-side firms, with only 17% of investment managers currently using low-latency data feeds, TABB Group estimates the overall spend on low-latency infrastructures, including message buses, feed handlers, ticker plants, complex-event processors (CEPs), physical transport and data storage and the integration and customization of internal and external applications to reach $300 million in 2007, and that the market for low-latency messaging middleware to total $95 million in 2007, growing to $168 million in 2010, a three-year compound annual growth rate (CAGR) of 107%.
The new solutions, explains McPartland, will be delivered through the formation of tightly integrated teams encompassing market, software and hardware specialists to enable the more efficient creation of the most optimal low-latency infrastructures. Although feed handlers, ticker plants and CEP engines are key to a successful low-latency infrastructure, without the proper messaging solution, he says, âthe environment will be no better than running a paper ticket down Broad Street. When it comes to low-latency messaging, one size definitely does not fit all.â
The 19-page research report with five exhibits, based on conversations with bulge-bracket broker-dealers, messaging-middleware providers and exchanges, covers software- and hardware-based messaging middleware as well as a hardware/software combination, the percentage of firms using low-latency data, costs relative to reduced latency and vendor selection guidelines.