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Tabb Group Says Financial Markets are 'Pushing the Envelope' in a Report Redefining Real-time Transaction Processing
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BOSTON, Mar 2, 2004 (BUSINESS WIRE) -- According to The Tabb Group in its new industry report, what Tom Cruise in the 1986 movie, Top Gun, said about hurtling through space at Mach 2, "I feel the need, the need for speed," is just as applicable to today's financial markets hurtling through a typical market open at 10,000 quotes per second.

From its introduction, "What's Driving Real Time?" to its conclusion, the new report, titled, "Pushing the Envelope: Redefining Real-time Transaction Processing in Financial Market", deals with the impact increasing transaction and data speeds are having on the industry. Specifically, financial engineering, FIX connectivity, algorithmic trading and black box models are dramatically changing the way that sophisticated traders and market participants are forced to address the markets, as lower costs and higher compute and networking speeds are enabling the creation of automated model-based trading.

"The limit for real-time transaction processing seems limitless," says Larry Tabb, founder and CEO, The Tabb Group. "The challenge will be applying faster servers, enhanced networking technology, better and more robust storage and a more focused set of data management tools in a more cost-conscious environment, swapping decentralized for centralized, high cost for low, batch for real time and big iron for small."

As these changes occur, explains Tabb, the one thing that seems as clear as the need for enhanced real-time transaction processing (RTTP) is maintaining a low cost infrastructure. "Although RTTP enables firms to capture opportunities, it also lowers margins, cost structures and competitive barriers, all but guaranteeing a price war and accelerated competition, and driving further what has become the insatiable need for speed but at increasingly competitive prices."

(EDITOR'S NOTE: The Tabb Group was founded by Larry Tabb, formerly vice president, securities and investments, at TowerGroup, recently purchased by MasterCard Advisors(TM), LLC, a subsidiary of MasterCard International, from Reuters (Nasdaq: RTRSY; London: RTR).)

Subjects highlighted in the report include:

-- Decimalization: "This has driven the automation of a majority
of trades executed on both listed and OTC markets, thus
becoming probably the greatest driver of real-time transaction
processing."

-- Real-time market data: "The Tabb Group estimates that
algorithmic trading strategies comprise 6% of current order
flow. As we approach 60% and 70%, tick count could increase
seven to 10 fold."

-- Hedge funds: "RTTP's driving short-term trading strategies as
convergence of asset classes enables converged trading of
heterogeneous products to take advantage of pricing
disparities between related but previously unlinked products."

-- Risk management: "Since many hedge funds and institutional
investors are leveraging the broker's execution
infrastructure, the broker will be held liable for problems
stemming from their clients' excesses...leading to
reinvestment in firms' risk management infrastructure."

-- Resilience: "Post 9/11, the Federal Reserve, the OCC and the
SEC and exchanges are applying pressure on firms to increase
their technology resilience in case of emergency or national
disaster."

-- Technology: "With blazing fast sub-US$1,000, 3-gigahertz
desktops, the processing speed of technology continues to
expand exponentially while their cost continues to decline."

The report also addresses the real-time value chain in financial markets, the rise of algorithmic and black box trading execution and how they altered market data dynamics, how hedge funds push RTTP, the increased importance of a robust, real-time risk management infrastructure and ensuring robustness across the enterprise. It also addresses, and provides industry forecasts, on RTTP's impact on the business, technology infrastructures and operations.

"While the post-trade process will never be as time-dependent as the trading process," concludes Tabb, "we will see pressure to accelerate it as cost constraints continue to be top-of-mind for operation and industry professionals keep 'pushing the envelope,' trying to fulfill the need for speed".

A copy of the report is available at www.tabbgroup.com/research.

About The Tabb Group

The Tabb Group is a financial markets technology strategy and planning consultancy focused on helping financial services firms, vendors and technology integrators better understand, create, align and execute their business technology visions. Based in Westborough, Massachusetts, The Tabb Group was founded in June 2003 by Larry Tabb, a 24-year financial markets veteran and the former vice president, securities and investments at TowerGroup, until recently a division of Reuters Group, where he managed research across the capital markets, investment management, retail brokerage and wealth management segments. For more information, visit www.tabbgroup.com.

SOURCE: The Tabb Group

martinrabkinink
Martin Rabkin, 914-420-5739
mrabkin@optonline.net


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