Having watched a few technology transitions in financial services over the last 15 years or so, and I have to say this feels a lot like others, with one big exception.....we really are reaching the point of diminishing returns here.
When we're done giving NYSE and other proximity hosters coin for shaving milli's off a transaction...and transitioning away from the TCP stack for distributed computing to 10G ethernet and RDMA..and all of our cacheing and reliability mechanisms are optimized for sub millisecond trade executions..and all the CPU's are Nehalem....
And service providers provide a level playing field execution capability to those without the wherewithal to build these systems....
Then what? Do we start looking for sub microsecond trading?
This trend certainly keeps alot of technologists on wall street and at tech companies gainfully employed, so don't get me wrong, an arms race can create some nice side effects..but you really have to stop and wonder whether this is creating a better market.
When the purpose of executing faster is to execute smarter, by taking advantage of fleeting price disparities, I think thats a good thing...but when its done to take advantage of fee structures, for example..I'm not so sure.
I think what I would like to see is more reasoned dialogue about where this is going, apart from simply taking advantage of the current market environment to make a short term killing.
What happens when everyone can trade at high frequency latencies?
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