How modular architecture, 24/5 trading, and the rising cost of change are reshaping equities infrastructure
By Ian Salmon, Head of Accelerator Program, Adaptive.
Equities trading infrastructure has traditionally been judged against a familiar set of measures: latency, throughput, reliability and the ability to remain stable during periods of intense market activity. Those requirements remain fundamental. But the environment around the technology is changing, and another measure is becoming increasingly important: how readily can the platform itself change?
Liquidity is becoming more fragmented across venues and geographies. Firms are processing greater volumes of market data and supporting increasingly complex execution workflows. At the same time, the industry is moving towards longer trading hours, with 24/5 – and potentially 24/7 – equities trading beginning to move from concept towards reality.
Many incumbent platforms continue to perform extremely well. The challenge is that they were often designed for a market with clearly defined trading sessions, predictable maintenance windows and substantial periods in which infrastructure could be upgraded or changed outside production hours.
Those assumptions are becoming harder to sustain. As a result, the economics of equities infrastructure are increasingly about the cost, risk and speed of change as well as the cost of running the platform itself.
The changing cost of maintaining equities trading platforms
The problem with a mature, tightly integrated platform isn’t necessarily that it stops doing what it was built to do. The difficulty comes when the business wants it to do something new.
Adding a venue, changing an execution workflow or introducing new functionality can have implications across gateways, order management, risk, market data, monitoring and downstream systems. Dependencies become harder to trace, testing becomes broader and releases become more complex.
Over time, this changes where engineering resources are spent. More capacity goes into maintaining compatibility, managing technical debt and protecting existing workflows. Upgrades may be deferred because the path into production is too disruptive or risky.
The consequences extend beyond the technology organisation. If connecting to a new source of liquidity takes months rather than weeks, or a client requirement is delayed because of the complexity of making a platform change, architecture starts to influence the commercial options available to the business. The cost of change becomes an opportunity cost.
How 24/5 trading is changing infrastructure resilience
Extended trading brings this issue into sharper focus because one of the industry’s longstanding assumptions – that there will be a convenient time to take systems offline – is disappearing.
Recent A-Team Group research found that 53% of respondents identified eliminating downtime for critical maintenance as their primary operational concern when preparing infrastructure for continuous trading. That has implications for the way resilience is defined.
Recovery from an outage remains essential, but firms increasingly need to patch infrastructure, deploy software and introduce functionality while production systems remain available. Resilience therefore extends to the ability to make controlled changes without destabilising the wider platform. This is why the shift towards 24/5 is more than an uptime challenge. It changes the operating model around the technology and, in turn, the architecture needed to support it.
From monolithic to modular
Modernisation doesn’t mean sacrificing the performance characteristics on which equities trading depends. Low latency, predictable behaviour, resilience and consistency remain non-negotiable.The objective is to make those characteristics compatible with an architecture that can evolve more readily.
That means establishing clear boundaries around capabilities such as order management, risk, connectivity, market data and trade management. If those capabilities can be changed, extended or scaled without every enhancement becoming a platform-wide programme, firms can reduce both the cost and the operational risk associated with change.
It also creates a different set of options when deciding how infrastructure should be built. A fully bespoke platform provides control over technology, intellectual property and roadmap, but requires considerable development effort and specialist expertise. An off-the-shelf platform may reduce the initial build burden, but can leave firms dependent on a vendor’s architecture and development priorities.
An accelerator model provides another path: using proven foundations and reusable trading capabilities while retaining the ability to build and own the areas where the firm genuinely differentiates. This can reduce the amount of foundational engineering required without surrendering control over the future direction of the platform.
Why modular architecture creates strategic flexibility
This changes the way firms should think about the economics of modernisation. The calculation cannot be limited to whether replacing an existing platform lowers its immediate operating cost. It also needs to consider what the architecture allows the business to do next. Can a new venue be added quickly? Can functionality be introduced without taking critical systems offline? Can individual capabilities be scaled or replaced without major re-engineering? Can the firm continue to develop proprietary workflows without depending on someone else’s roadmap?
These questions become more important as equities markets move towards longer operating hours and a more distributed liquidity landscape. Architecture increasingly determines how quickly a firm can respond when the market changes.
The fundamental performance demands of equities trading aren’t becoming any less exacting. What is changing is the expectation that infrastructure must meet those demands while continually adapting around them. The economics of modernisation increasingly come down to giving firms the freedom to make that change faster, more safely and on their own terms.
Learn more
Our new white paper, The economics of modernising equities trading infrastructure, explores these issues in greater depth, including the technical and commercial considerations firms should assess when evaluating their future trading architecture.
They will also be central to the upcoming A-Team Group webinar, From Monolith to Modular: Architecting Equity Trading Platforms for 24/5 and Beyond, where we will explore what continuous trading means in practice for platform design, resilience and modernisation.
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