Good connectivity can help lower the latency barriers that regulation is imposing, says Dan Barnes
Imagine a series of concentric circles; in the
centre is a matching engine at an exchange; in the next ring
are the client connections direct to the matching engine; in
the next is the surrounding ecosystem that encompasses all the
other connections, market data and traffic that supports an
"There is a huge war going on in that outer
circle," says John Lowrey, global head of Electronic Product
& DMA Services at broker Marex Spectron and board member of
connectivity provider MarketPrizm. "No-one is really fighting
over matching engines as they are quite commoditised; they do
care about client connections, but it is really that ecosystem
where competitive pressures exist and where money is being
spent. If you look at investment patterns, that tertiary space
is where it is happening, that's the true battleground."
The current requirement for greater connectivity
stems from the wholesale change that regulation is imposing on
markets globally. The G20 mandate to centrally clear OTC trades
and push standardised contracts onto electronic platforms is
creating several new stages of processing in what were
previously bilateral deals. As a result, trading firms must
connect with new venues, clearing brokers and clearing
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