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2009 CIO Challenges: Low-Latency Technology

Industry experts examine the focus on low-latency, and whether Wall Street CIOs will continue to go faster in 2009.

Read more from WS&T's expert roundtable on the challenges CIO's face in 2009.

Julio Gomez, Mayiz Habbal, Rob Hegarty, Robert Iati

WS&T: Low-latency technology has been a focus of the past few years. In today's environment, does the need for speed still trump most other requirements in the front office?

Rob Hegarty, TowerGroup: I don't know if it trumps most other requirements. It is critically important and can't be understated. Many people have asked, "How much faster can it get?" It can always get a lot faster. What has happened is that a lot of the low-hanging fruit has been picked off when it comes to low latency. What that means is there is a lot of commonality now of low latency that is being delivered in a number of solutions. It is not going away, and it is probably not as critical an issue as it was two years ago. But there still is a necessity, although it has cooled a bit.

Julio Gomez, Gomez Markets: The need for speed is going to continue. You have high-volume quant trading on one end and structured products and derivatives on the other end. Quant trading is always going to have a value attached to speed and the speed advantage. On the other hand, an interest rate swap is going to value other factors.

Robert Iati, TABB Group: More than anything, it depends on the value proposition of the institution. Not every institution is focused on having the lowest-latency trading. [For] any firm that is positioned as a trading firm, certainly milliseconds will matter. Latency is top of mind, whether it is equities or now derivatives and FX. One of the elements we found in the "Institutional Equities Trading in America" study is that post-crisis there is much more aggressive algorithm trading and much less big-block trading because ... you need to be more aggressive in the market. The more the flow goes to algorithms -- the more reliance [on algorithms] -- the more you will be focused on low-latency trading because now you are back into the same high-speed, electronic fragmentation of the markets. That is one element that says that low latency will be key for trading firms in this market.

Mayiz Habbal, Celent: The need for speed -- there isn't anything that is going to change that paradigm. The markets [before the crisis] were in a completely different mind-set than they are now. Algorithms were built to capitalize on speed and a certain market behavior, but now the markets have a completely different behavior -- with wild swings of 500 points. But any kind of algorithm built [before the crisis] now has to change the way it performs and the way it optimizes the markets today. All of the premises are very different right now. Speed is definitely an edge, but you can't discount the change in the underlying principles.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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