Demand for market data acceleration is driving the global investment in sell-side, market-data distribution technology in 2012 to $3.6 billion, according to a report released by the Tabb Group.
The report, Market Data Acceleration: More than Just Speed, also predicts 4.5% compound annual growth in these investments for the next three years based on expected growth in FX, Derivatives and Commodities as well as movement by Asian markets towards automation.
The largest segment of this investment, 73%, will come from Europe and North America, but according to Tabb Group, there’s considerable growth potential from the Asian markets.
Moreover, while the equities markets are matured from a growth perspective, driving 45% of the global spend, a strong percentage of growth will come from over-the-counter (OTC) derivatives, FX and commodities.
According to the report, market data is an area where performance can play a crucial role for a host of trading activities. Obtaining, decoding and utilizing market data in a timely and efficient manner are no longer the purview of the ultra-low-latency firms; everyone involved needs to be able to get at market data in as timely a fashion as possible.
“This is not to say that everyone needs to be at the ‘tip of the spear’; however, it does mean that anyone who is actively involved in trading needs to be moving in that direction,” said the report.
However, according to the research firm, firms are struggling with conflicting pressures of the “need for speed” in comparison to the “need to save,” as they try reconcile price with performance.
“Market participants need to ensure that their investment in speed gets them more than just a solitary solution for a single platform,” said Tabb partner and report writer Alexander Tabb in a statement.
Different firms, according to Tabb, have different strategies, thus different needs. Whether a firm is a high frequency trader, an institutional market maker, or an algo-trading desk, the challenge is placing speed into its proper context within the accelerated market data equation.
“Due to the democratization of speed, it’s essential for every buyer to remember to factor in total cost of ownership, price versus performance, operational flexibility, control, scalability and time-to-market,” says the report.