TRADING: The low latency arms race – driving focus on speed, ROI and energy efficiency

Trading in the financial markets continues to be at the leading edge in terms of building new business practices and implementing the latest technology in the quest for competitive edge and commercial survival.

Speed, cost reduction and management of risk are key objectives for the front office. As a result it has long become the venue to put the latest technologies to the test in order to manage risk while gaining massive returns – with only milliseconds separating winners and losers.

The latest innovations in quad-core and multi-core processing technology mean that lightning speed is actually there for the taking. Financial institutions are now building or looking to build optimum infrastructures to support this step-change in performance and take advantage of the computing power that is now available, while still reducing power requirements and total cost of ownership.

Meanwhile, the drastic reduction in the cost of technology which today’s commodity, open technologies have driven in recent years has lowered the barriers to entry for new players in the trading life cycle – from the statistical arbitrage technology-enabled hedge funds to new liquidity pools, execution venues and routing services.

New business paradigms surrounding latency, arbitraging and electronic connectivity are underpinned by technology. Intel is committed to working closely with the financial services industry to apply its expertise to enabling innovation across the sector. As active supporters of FIX and other relevant market de facto standards, we will see the reach and awareness of Intel’s influence in the trading topology increase.

Intel technologies, supported by our partner community, are widely established across both the buy-side, sell-side and increasingly in the markets’ central venues where high-end, non-stop environments have traditionally been prevalent. From the trader desktop to the central servers and routers, Intel technology is demonstrating leadership in terms of performance and power efficiency.

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RISK: Sine qua non

Risk management lies at the heart of the financial services industry and influences everything that the industry is and does. With ever increasing volumes of data, regulation and competition, there is a huge pressure on financial institutions to have a complete view of their risk at any time to support decision-making and ensure compliance.

Whether it is market, credit, operational or systemic risk, technology obviously plays a huge part in the successful management and measurement of risk. More and more, financial institutions need to be able to process huge amounts of data in short amounts of time in order to maintain competitive edge.

In the computation of market risk, the speed and performance of the latest multi-core processors are vital to both protecting the balance sheet and opening up market opportunities. As the market becomes ever more capable of handling true enterprise risk on a global scale, the latest processors are proving essential for handling the resulting massive datasets of credit risk.

The operational risk agenda of Basel II means that financial institutions are looking for the utmost reliability, scalability and performance from their technology infrastructure. Similarly, as the financial markets become increasingly electronic and the velocity and value of messages carried over the wire continues, technology assumes a place in the systemic risk of the entire market infrastructure.

Well inside a generation, Intel and its community of partners have spearheaded the evolution of technology from massively engineered mainframe and fault tolerance to agile and flexible low cost commodity components which now run at the heart of the market, propagating innovation and change. The latest Intel technologies offer mainframe-class processing that is now driving the largest risk data fabrics emerging in the market, while also providing the reliability, scalability and performance that management of operational and systemic risk demands.

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SUPPLY CHAIN: Connecting the financial and physical supply chain

Trade finance has long been a core service for banks, leveraging their trusted position between globally dispersed buyers and sellers. Documentary credits, bills for collection, bills of exchange and a range of finance and lending schemes have persisted over the centuries.

The last 20 years have seen that status quo fundamentally shift. Electronic documents entered the scene in the 1980s with Electronic Data Interchange (EDI), while air transport means goods are arriving at the destination before documentation can be processed and funds exchanged for settlement.

While the position of financial services in the supply chain is most likely guaranteed, the traditional banking role is fundamentally challenged. Financial innovation has to meet trade innovation – and today the jury is out as to whether this is happening fast enough.

Technology, however, has an important role to play in the new landscape. The reduced cost of technology means it can be applied to areas previously not thought economically viable to do so.

New, de facto standards for data and networks plus the ubiquity of the internet, familiarity with mobile techniques and an understanding of security risk means that the supply chain model is entering a period of fundamental change. Tracking technologies such as RFID and global scale databases of information can be applied to physical goods but when applied to visibility of operational risk in lending, traditional credit considerations in the finance of trade can be turned on their head.

Intel is actively participating in this arena, encouraging collaboration across the supply chain through industry meetings and involvement with RosettaNET and leading through technology innovation. As mobile becomes the next frontier, Intel is investing in use cases to demonstrate where mobile technology can go – extending the compute envelop beyond ERP and using handheld devices to push the advantages of automation earlier into the supply chain, resulting in cost reduction and financial cash flow benefits.

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MULTI-CHANNEL: The customer knows best

The retail financial services sector has been getting to grips with multi-channel delivery in earnest over the last 8-10 years and we are now seeing banks use more and more innovative ways to adapt and appeal to the retail market.

Branches are leaving the high street and coming back as multi-purpose, financial, retail and advisory centres, with the added attraction of supporting restaurant and store facilities. Call centres are adjusting their style and have interactive and consolidated views of the customer across multiple products and locations. The Internet and mobile channels continually build their footprint as the interface becomes more sophisticated and consumer habits have converted borrowing and lending activities from the luxury advisory service product of a few years ago to market-stall status.

Be it market share or wallet share, banks are recognising that competitive advantage is achieved via a variety of channels to an ever more sophisticated client base. It is about choosing the right channels for the right audience at the right time and providing integration, consistency and maximum service level across all.

However, old habits die hard and old procedures and business processes can be locked in. It is technology that can, and is, driving change and innovation virtually overnight. The winners in the multi-channel world will be those that embrace technology and the integration, performance and reach it provides to the customer. Intel is working closely with partners and financial institutions to make sure that the customer and staff experience is optimised across all channels using the latest performance-enhancing technology, from enterprise level right through to desktop and mobile device.