Having already launched its first foray into low-latency infrastructure monitoring for the financial markets, network performance vendor NetQoS is now said to be considering the development of a product specifically for monitoring the delivery of financial market data. Given that there is no single protocol that dominates in market data, NetQoS may have identified a viable commercial opportunity.
NetQoS technology is already used to monitor enterprise-wide network traffic to understand how market data affects other traffic and vice versa, so it is not as it this move would be a completely new departure for the company. What it does not currently have, and what would make sense to develop after launching Trade Monitor for the Financial Information Exchange (FIX) protocol, is a product that can understand and monitor the specific protocols used to deliver market data, but that is also where the challenge arises.
Low latency, measured in microseconds, has become a requirement for infrastructures supporting trading in certain asset classes such as equities, options and derivatives in recent years. This is the result of a range of developments, including the fragmentation of venues, which has caused a move to a larger number of small trades replacing a smaller number of big ones, and the growth in algorithmic trading to automate the decision process.
While providers of trading applications, messaging, servers, storage and networking gear are all investing to address this demand, a number of players in the monitoring space have stepped up to the plate to enable the IT departments and individual traders in both buy- and sell-side firms to measure how successful their infrastructure is at providing the lowest possible latency.
The requirement is on both sides of the trading process: the ingress, when market data is brought in from exchanges and consumed by the traders and/or program trading platforms, and the egress, where a buy or sell order is placed for execution.
There are a number of start-ups which focus exclusively on monitoring for the capital markets, such as Correlix and Trading Metrics. Others have moved from a broader play to the more specific world of financial markets, such as Corvil, and still other generic network monitoring vendors such as Network General (now part of NetScout) and Network Instruments have either launched versions of their products specifically for this space or are about to do.
NetQoS is part of the last group: it is entering the fray via its acquisition, announced in June, of specialist developer Helium Systems, whose technology underpins Trade Monitor for FIX. This is a 1U appliance using packet capture and timestamping hardware from Endace, and is aimed at the trade execution side, where the FIX protocol has the lion's share of the market in terms of transport layers.
A logical next step, of course, would now be for NetQoS to extend its portfolio for the financial markets to the market data side of the equation, and the company says that it is looking at how it might approach this issue. Clearly one of the challenges is that there is no single protocol or standard for delivery platforms, with each one using a proprietary approach. Rather than develop multiple protocol-specific products, the company may opt for an approach that is agnostic.