Architects of Electronic Trading

September 30, 2013 07:00 PM

Architects of Electronic Trading: Technology Leaders Who are Shaping Today’s Financial Markets
By Stephanie Hammer

John Wiley & Sons, Inc. (2013)
$75; 188 pages

Technology is regarded by many as the shape-shifter that, for better or worse, changed the face of trading forever and is the monster that keeps the ground beneath the markets unstable.  Stephanie Hammer’s new book wrestles the electronic beast to the ground and makes financial technology easily understandable and accessible for all.

Hammer is no stranger to the business, having been a derivatives trader at a proprietary firm and head of communications for the Eurex Exchange in Frankfurt, Germany. She presents a series of engaging interviews with industry experts discussing all of the different ways that technology touches trading.

Technology first began to shape trading in the late 1980s and is considered by many to be the cause of the 1987 stock market crash, as well as the beginning of the end of open outcry trading pits. Hammer looks at all of the aspects of technology in financial services as a solutions provider and game changer.

In her introduction, Hammer writes: “The brisk pace of change affects not only those in the high-frequency trading (HFT) category. Rather, changes in both technology and markets affect every participant. Even for firms that are not HFT, exchanges and trading platforms release software upgrades, telecommunications providers expand line capacity and market data and other vendors introduce new functionalities. These are just a small number of examples. In today’s highly interconnected financial markets, participants can be connected to hundreds of systems, which they must integrate and maintain in order to operate on a daily basis. Keeping up places serious demands on firms in terms of human and financial resources.”

From HFT to risk management to social media, Hammer speaks to the experts about how technology is shaping these different aspects of the business and touching everyone from the largest asset management firms to the individual trading his own account at home.

Suhit Gupta , technology consultant and former chief technology officer at Maverick Capital, Ltd., is one of the experts interviewed. “New developments are helping technologists to optimize business processes, which in turn boost productivity.  A better foundation on the IT side enables the business side to be more creative about generating alpha,” Gupta says. 

The Gupta interview sets up a common theme that runs throughout the book: Technology levels the playing field by lowering costs and increasing productivity across the board. Looking at how technology has enabled the globalization of markets, Justin Llewellyn-Jones of Fidessa Corp. tells Hammer “Standards democratize markets in that they make it both easier and cheaper to trade.”

Through the eyes of experts from different parts of the industry, including Tower Research Group, The Blackstone Group, NYSE Technologies and others, the book addresses hardware acceleration, GPUs, microwaves, cloud computing, trading and risk systems, data centers, Big Data, social media and the shortage of IT talent. In each area Hammer asks each interviewee to discuss the lifespan of a particular technological edge and some of the answers are rather surprising.

This book makes complex technology issues accessible to all. Whether you are a large and sophisticated firm trying to decide between CPUs and GPUs or microwaves and fiber optics, or an individual trader trying to understand what HFT means to your strategy, this book is worth your time.

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