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Electronic Trading Moves Into Fixed Income

Evaluating a price in the Equities or Foreign Exchange (“FX”) markets does not require much calculation, and so one of the prime limiting factors on winning those trades has been the speed of data movement, from one application to another, either within the same host or across the network. But the world of Fixed Income, commonly known as “bonds”, is different.

Fixed Income securities require lots of calculation because they can be extremely complicated, with pricing models that include many factors – obviously, the price of the bond, plus the financial health of the issuer (government, corporation, or underlying securities such as bundled mortgages), the latest interest rate announcements, trade balances, GDP projections, fluctuations of the currency the bond is sold in, etc. And every time one of these factors changes, the whole series of calculations must be re-done. This can take a long time, possibly an hour or more (rather than microseconds as with equities).

As a result, many investment banks and other electronic trading companies have been slow to adopt a purely electronic trading strategy for Fixed Income. Indeed, when a single trade takes anywhere up to an hour or more to evaluate, you might think that saving a few microseconds here and there won’t make any real difference.

But what if the application must retrieve data from many other applications, many many times during that series of calculations? Then a few microseconds per retrieval can add up very quickly, and once again, as with Equities and FX, that latency advantage could be the difference in finishing first and winning the trade, or finishing tied for last and losing out on the trade.

In addition, if your competition is using faster messaging middleware than you are, that could mean that your competition wins more trades than you do, directly affecting your revenue and bottom line.

At our upcoming Informatica Ultra Messaging event in New York City on June 7, you can hear more about moving Fixed Income into the world of electronic trading. Plus, hear our VP of Messaging Architecture Todd Montgomery discussing “Building a Next Generation Messaging Architecture.” Also featured is a customer panel entitled “Innovative High Performance Messaging Deployments,” plus discussions on real-time risk analytics and the latest on the Informatica Ultra Messaging features and product roadmap. Register here: Low Latency and Beyond: Building a Modern Reliable and Ultrafast Messaging Architecture.

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