Most financial institutions have tuned their networks or taken advantage of proximity hosting solutions. The network, on average, contributes to just 13% of a system's overall latency. This is now the second smallest contributor, below messaging (at just 2%). The new latency culprits are the applications at 65%, and firewalls at 20%; which together contribute to 85% of overall latency today.
"Latency is produced at numerous steps in the trade processing chain, however it can be simplified into three main layers; the network, the middleware and the applications. Our research sought to dispel some of hype that circle around the industry, and reveal the true landscape of latency requirements across all lines of business," states Andrew Staniforth, Senior Consultant at NET2S and lead researcher of the study.
"Our research shows that the fight against latency in both the middleware and network layers is pretty much a won battle. In the last few years in London alone, the average tier-1 investment bank spent close to Â£10 million on direct connectivity, hardware upgrades, increased bandwidth and proximity hosting. The industry must now do battle with their applications if they are to finally win the latency war, and we predict that significant investment will be made in this space over the next few years," concludes FrÃ©dÃ©ric Ponzo, Managing Director of NET2S and co-author of the report.