The market for low-latency messaging middleware is set to rise from $95 million in 2007 to $168 million in 2010, a three-year compound annual growth rate (CAGR) of 107% as investment banks ramp up spending on the technology to cope with rapidly increasing message volumes, according to forecasts from Tabb Group.
The global equities and options markets are producing an average of more than seven billion messages a day and this is set to rise to more than 128 billion by 2010, says Tabb Group.
Based on interviews with buy-side and sell-side firms - with only 17% of investment managers currently using low-latency data feeds - Tabb Group estimates the overall spend on low-latency infrastructures to reach $300 million in 2007. This includes message buses, feed handlers, ticker plants, complex-event processors (CEPs), physical transport and data storage and integration of internal and external applications.
However, while reducing latencies is now a necessity, legacy-messaging middleware remains a source of friction, says Tabb senior research analyst Kevin McPartland. He says many investment banks plan to double if not triple their budgets for low-latency messaging middleware - from $95 million in 2007 to $168 million in 2010 - in an effort to capture every possible profit opportunity in the hyper-competitive trading markets.
"This vote of confidence from major sell-side institutions will likely lead to smaller shops following suit in an effort to provide a significant value-added service sought after buy-side clients," he adds.
McPartland says new solutions will be delivered through the formation of integrated teams encompassing market, software and hardware vendors to enable the more efficient creation of the most optimal low-latency infrastructures.