Management Information Systems
Wachovia and Others: Trading Securities at the Speed of Light
This case study will look at a recent article :Wachovia and others: trading at the speed of light. We will look at the technology of the Giga Ethernet as well as some of the Pros and Cons of these technologies. Last we will come to a conclusion of this technology and what the future will hold for truly trading at the speed of light.
Latency is a competitive advantage in a lot of markets, algorithmic trading being one, that companies are looking very hard for the next technology that's going to make them a little faster than their competitors. A lot of forward-looking investment banks are seeing that they can do message routing 10 to 100 times faster in hardware and get latency that's one-tenth what it would be in a software solution, which offers a huge competitive advantage to whoever gets that into their network first. Some of these are sustainable, and some temporary or easily imitable. I think that over the short term Giga Ethernet will be on sustainable way to keep the competitive advantage while physically locating your network close to the trading floors will be on more permanent way to keep the competitive advantage. While today we have 10/100 base Ethernet and now the much faster Giga Ethernet works tomorrow there will be faster Tera byte them Penta byte networks which will make the Giga networks considered slow.
Companies in industries other than securities trading that also could benefit from technologies that focus on reducing transaction processing times are Online reservations systems in the Travel industry. Companies like Price line, Expedia, Travelocity are just a few that could highly benefit from reduced transaction times. When e-business potential clients log on their networks and price out a flight or hotel. Companies like Priceline.com need to be able run complex algorithms to get the...