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The Network Effect

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Looking at the latest news from Sanford C. Bernstein, about them joining SunGard’s Global Network got me thinking a bit. First, what does the “C” stand for? Next, since I couldn’t find an answer to that first one, is where do networks from the likes of SunGard fit in the low-latency world? And it all comes back, I think, to leveraging the right technologies to meet business goals.

While there continue to be many firms that want to be the absolute fastest, want to build their own trading systems and feed handlers, manage their own networks, and spend oodles of bucks on shaving off microseconds, there are a lot more that just need competitive market access – both in terms of speed and cost.

This is where the likes of SunGard, BT Radianz and Fidessa play, methinks. They are not the fastest way to connect parties together – and don’t claim to be – but they offer all the benefits of a managed service, as well as a ready made community of potential customers.

By linking in to SGN, Bernstein has ready access to some 2,000 buy side firms that could be interested in its algo trading services focused on 24 European markets. And for those buy side firms, SGN represents a straightforward, fast time-to-market, lower cost route to accessing those markets, and leveraging Bernstein’s algos. Those building their own algos to gain an edge, are more likely to plumb in direct connectivity to those markets. So it’s down to business goals – and return on investment (ROI).

In May, Lime Brokerage (recently acquired by Wedbush) teamed up with BT Radianz to offer its pre-trade risk functionality to other broker/dealers on that network. That could be attractive to those firms seeking SEC compliance without looking to build that complex functionality themselves.

And more recently, Fidessa brought Haitong Securities onto its network to provide its community with access to the Shanghai and Shenzen stock exchanges, which one presumes would be quite an undertaking for any firm wanting to go direct.

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