Architects of Electronic Trading: Technology Leaders Who Are Shaping Today's Financial Markets

CHAPTER 13

Evolution

The New Revolution in Trading Systems Design

As discussed in the previous chapter on data centers, the industry is more interconnected than ever before. Technology has facilitated the creation of vast networks that enable participants to operate globally, but also introduced a large number of dependencies among participants. In this chapter, the focus is on how the interdependency among market participants slows the pace of technological change. But, it makes the case that this slower pace of technological change reflects the operational realities of complex global markets. Gradual, well-executed change is not only more manageable for market participants; it also reduces risks involved in hasty implementation.

With few exceptions, the financial world has embraced electronic trading. Since its infancy in the 1990s, trading technology has continued to improve incrementally to provide customers with more sophisticated functionality, increased throughput, flexibility, and stability. Whereas exchanges once provided their customers with round-trip times in the seconds, now they deliver in microseconds. Commonly referred to as the “arms” race, the push to increase trading speed has been so successful that the market has now moved to tackle other challenges like the attainment of consistency in roundtrip times, handling massive amounts of market data, and applying technological advances to increase market safety, like in the development of automated risk control mechanisms. ...