Is Low-Latency Market Overcrowded?

Lots of vendors are chasing business in the market for low latency trading by Wall Street firms. Too many, perhaps?

There were plenty of technology vendors at a recent conference by the Securities Industry and Financial Markets Association (SIFMA), many of them presenting products for low latency financial trading. Perhaps too many vendors, according to Larry Tabb's account in Wall Street & Technology. "I don't want to rain on this parade," Tabb writes. "However, not every trading desk needs to execute at sub-millisecond speeds." He continues:

While the market for low-latency infrastructure is significant, it is smaller than many realize. Realistically, the infrastructure has a potential market of less than 200 firms - if you count multiple instances within an organization, that number may increase to 300. But the number of firms that will pay top dollar is probably less than 100. This is not a vertical market that will support 100 overlapping and poorly messaged vendors.

Interest in low latency trading has generated significant business for several data center service providers, most notably Savvis in New York (Weehawken) and Equinix in Chicago. The market for new trading technology is expected to grow by 7 percent by 2010, according to some analysts.