|US Equity Technology 2010:
The Sell Side Perspective
Over the next few years, available IT investment needs to be allocated smarter and more efficiently than ever before because of slow budget growth. Brokers will scale servers vertically rather than horizontally. Co-location will continue to be critical for some firms, but they will take a closer look to see when proximity hosting may suffice. The sell side’s use of data center space will increase slightly overall, but consolidating scattered square footage into fewer facilities will be the focus.
Latency will still be crucial to brokers, but uptime and ease of implementation often trump a few microseconds saved in the brokerage business. Server purchases will lean toward commodity x86-based hardware. Sun SPARC servers and IBM mainframes will continue to have their place, but the logos of Hewlett Packard (HP) and Intel will be the most prevalent in the sell-side US equity data center. The battle between Windows, Solaris, and Linux will go on for years as each works to surpass the others on features, stability, and of course price.
Supply and demand of bandwidth will also increase as exchanges pump out more data leading to more trading—which in turn creates more data. This is the primary reason why sell-side firms continue to focus on network upgrades, both inter- and intra-data center for the foreseeable future. Yet despite its generally widespread availability, improving utilization of bandwidth will be more important to brokers going forward as growth in data rates and related costs do not always line up nicely with increased trading revenue.
A completely virtualized and highly utilized infrastructure is many years off for sell-side firms in the US equities business. The penalty against latency and the unpredictability of the market make both wide-scale virtualization and 99% utilization improbable, if not impossible. However, a large gap still exists between what is currently possible and what is actually done. Future infrastructure will more efficiently utilize idle servers that once waited for markets to spike and also maintain the ultra low latencies required for equity trading.
The winning brokers will be those that not only have the latest and greatest technology, but can also manage it most efficiently. Horizontal infrastructure teams will continue their expansion, despite the specialized needs of US equity focused networks. The scale gained from working across product lines far outweighs the benefits of business-aligned teams.
US Equity Technology 2010: The Sell Side Perspective
The study focuses on US equity infrastructures and is based on conversations with CIOs, CTOs, and heads of technology at 24 sell side firms. Bulge bracket firms accounted for one quarter of total participants, however this equates to two thirds of all bulge bracket firms. The discussions covered usage and trends related to data centers, servers, CPUs, operating systems, networking, hardware acceleration, virtualization, cloud computing and IT organizational structure. Also discussed were top infrastructure projects, expansion plans for 2010, methods for expanding while under budget constraints and decision making factors when purchasing new technology.