FOCUS NEW YORK
Issue 14, February/March
THE FAST LANE TO WALL STREET
Trades can happen at the blink of an eye these days, and it’s all thanks to fiber. Penny Jones takes some time out to remember a slower New York, and reflect on how fiber has changed the trading floor
you can’t get better than ‘Wall Street’ itself, famous for summing up the entire the city’s financial market.
W
Its name first coined in the 17th century, Wall St was famous for being the boundary of the New Amsterdam settlement, designed to stop English colonial encroachment. In 1685 an actual wall was created. Today new fiber connections are piercing holes in that wall, reaching out to exchanges around the world while increasing New York’s internal competitive edge by linking companies and systems to each other at record speeds.
Trading has come a long way since the origins of the New York Stock Exchange in 1792, and since its inception, from the 1929 stock market
hen it comes to analogies that describe what has taken place thanks to fiber entering stock exchanges
in New York,
crash that led to the Great Depression to the terrorist attacks on the World Trade Center on September 11 2001, the world has had an almost voyeuristic eye on its activities.
For Wall St insiders today, however, the most attention-grabbing headlines seem to be about new frontiers for connectivity.
HOW FIBER CHANGED THE FINANCIAL WORLD
Kevin McPartland worked for Morgan Stanley in the late 1990s. He remembers when fiber first started to creep its way out of operations and into the stock market. “The floors of the exchanges started to disappear,” McPartland, who now works as an analyst focussing on technology and trading with New York analyst firm TABB Group, says. “I was supporting the equities desk at JP Morgan when they brought in touch-screen technology for brokers so they could electronically transfer information
THE NUMBERS THAT COUNT
US$ 1.8bn The amount of money the financial services industry spent on connectivity in 2008 US$2.22bn The amount of money the financial services industry is predicted to have spent in 2010 on conectivity
US$13.4bn* The amount of money institutional capital markets businesses are expected to have spent in 2010 on their infrastructure across equities, fixed income, FX, derivatives, commodities and other capital markets businesses (41% of this spend is in the US)
125 terabytes The amount of market data the network of every major market participant in the US is expected to have consumed given no microsecond is wasted or packet lost in 2010
115 miles The distance that will need to be cut from current networks between New York and Chicago to get a two millisecond saving on a network roundtrip
US$80,000 The cost of leasing a single 10GB wave on a low-latency route in the US
300 The number of firms predicted to be actively using the lowest latency connections in New York and Chicago *This figure excludes data centers, servers, storage and networking (Figures from TABB Group)
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to the exchange floor where a paper ticket would print out. The fact we could send down something electronically and print it out was pretty amazing back then.”
It was not too long after that the FIX (Financial Information eXchange) protocol was brought in. Developed by banks, brokers, dealers, exchanges and IT providers around the world (and involving a range of others from the financial space), FIX introduced a new global language for messaging specifications for electronic communication of trade-related messages.
“This changed how orders were transmitted. It allowed you to have an asset manager which could use systems to automatically send orders directly to brokers. It was quite revolutionary. An order would pop up from a trader who could send to NASDAQ without having to enter a thing on a keyboard. This was in about
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