Group Co.
The Connectivity Evolution
Traders Magazine Online News, July 12, 2017
The mantra in real estate historically has been location, location, location. In trading, it’s largely connectivity, connectivity, connectivity. Those who connect fastest, most efficiently and securely can reap huge gains versus those who don’t.
In recent years, the choice in offerings for the buy-side has exploded, providing a bevy of options for connecting to the markets.
Starting in the early 2000s, connectivity for the buy-side trader mainly consisted of using a peer-to-peer network (P2P) to connect to their broker counterparties. These networks, often provided as part of the OMS offering, were reliable but costly and difficult to manage.
But by the middle of the decade P2P gave way to a new and unique way of order routing and transmission – the hub-and-spoke method – where the buy-side could plug into a single central distribution channel point and let it transmit orders to multiple sell-side destinations. Pioneered by NYFIX, the hub-and-spoke model provided a cheaper, faster and more uniform and secure method for trading.
George Rosenberger, Itiviti
These days, the buy-side’s needs have gotten more complex – sending out thousands of orders per second, to myriad brokers and lit and dark destinations – forcing networks to become faster, more technologically advanced, secure and reliable. NYFIX, now owned by technology provider Ullink, remains a major player, but the systems it and others offer have evolved tremendously.
Not Your Father’s Network
Today’s connectivity networks are multi-service and multi-asset, making them a one-stop shop of services catering to the needs of the buy-side trader. Think of these new networks as a Wal Mart for the buy-side; not only is there routing, but additional services such as trade cost analysis, network analytics, managed support and a bevy of others.
The buy-side’s demands have changed as well – stringent performance, reliability, transparency, ease of use and customer support requirements must be met by providers of these services. Today NYFIX is joined by a slew of other providers, including Itiviti, Thomson Reuters’ Autex, FIX Flyer and LiquidityBook, seeking to meet the buy-side’s FIX connectivity demands, which have never been greater.
“The buy-side typically dictates the network vendor to use for connectivity,” George Rosenberger, Senior Vice President, Global Head of Managed Services at Itiviti, told Traders Magazine. “That decision can be based on several factors such as the buy-side’s view on network security, their OMS provider and its affiliation/relationship with the network and now more than ever, most OMS vendors also provide a their own private-labelled version of a network. Those OMS vendors make it commercially attractive for the buy-side to also use their network, which is subsidized by charging the brokers for each connection.”
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