The more things change, the more they stay the same.
Technology has been said to be the one constant in an ever-changing world. Back in 1998, trading floors such as Nasdaq’s, were coping with new technologies – like the Internet, FIX Protocol and others – that while costly, was needed for survival in the 21st century.
Instinet’s John Comerford painted a picture of the market back then.
“In 1998, Instinet’s core technology was being transitioned from a PDP11 to Unix. Market-wide connectivity was different,” Comerford said. “For NYSE names, there was DOT, where response times were in the seconds. For NASDAQ names, Instinet’s ECN was the place to trade. And everyone was dedicating resources to Y2K.”
Fast forward 17 years and technology remains a top requirement to effectively conduct business. Whether one is on the buy- or sell-side, having the most up-to-date technology is a perquisite to getting business done. But there remains the constant conundrum of how much to spend versus how much the amount spent contributes to the firm’s bottom line.
Robert Dykes, CEO of OEMS provider TORA said that in the late 1990s, the move to decimalization and regulations like Reg ATS and Reg NMS contributed to technology costs accounting for the largest budgetary line item outside of headcount for the industry.
“That trendline has continued unabated for nearly 20 years since, though we seem to be reaching a tipping point with how much technology cost the buy side and sell side are able to bear,” Dykes said, “ Many technology firms are starting to recognize that reality and those that can deploy solutions that align with these budgets are well positioned to replace legacy technology providers with large fixed cost infrastructures.”
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