By Rob Ruehle, Vice President of Operations, Liquid Technology
Although computers entered the financial services sector as early as the 1960s, it was the advent of the internet and low-cost computer hardware in the ‘90s that fueled the emergence of all-electronic trading platforms. Fast-forward to today, and a financial system that began with mainframe computers has become a digital information ecosystem that is increasingly reliant on such next-generation technologies such as Artificial Intelligence, Big Data algorithms and cloud. To keep up, firms that engage in high-frequency trading (HFT), must regularly invest in new tech equipment to be at the top of their game and remain competitive in an industry where optimum technology performance and speed are the key drivers of their success.
The International Data Corporation (IDC), a provider of market intelligence and advisory services, has found that old and inefficient computer technology and network infrastructure causes a decrease in productivity and an increase in security risks. Moreover, older technology is more likely to break down, increasing the risk of downtime. Legacy technology is also more difficult and costly to maintain, and in many cases can’t deliver the performance and advanced features that newer technology provides, which can create a competitive disadvantage. In fact, the emergence of cloud technologies and an increase in the adoption of private, hybrid, and public cloud in the financial sector, including trading environments, has accelerated the need to reduce IT equipment on premise.
In the world of HFT, the discipline is all about speed. The process for HFT is one that uses advanced algorithms and computer programs to automatically analyze the market and execute the best transaction at the fastest speed. Speed and performance are expensive propositions and yet new equipment and IT solutions are the only way to acquire more of it.
Total US trading volumes today are more than double what they were pre-financial crisis (2009), largely pre HFT years. The difference in volume is mainly due to HFT strategies. Speed drives volume and growth in the market. (Source: Credit Suisse Trading Strategy).
The growth in HFT is driving more requirements for IT asset disposition. Learning how to mitigate the risk of total hardware investment and minimize the total cost of ownership is a question worth pondering.
It’s also important to bear in mind that hardware and software that has reached its end-of-life may still function, but will no longer be supported by the manufacturer. If a financial services company continues to use this technology, it won’t receive critical security patches and updates, which creates a higher risk for security breaches and regulatory compliance violations.
When one considers the costs and risks, it makes good business sense to regularly upgrade computer technology. Every business, but especially high-frequency traders for which milliseconds can mean the difference between millions gained or lost, would be well-served to perform a risk assessment and prioritize the IT equipment that’s essential to daily business operations.
So, let’s say that a HFT firm has determined to upgrade its systems and hardware and dispense with its legacy equipment. Disposing of retired IT assets presents a serious data security risk. There are more than 500 federal and state regulations that govern IT asset disposal. When taken out of service, an organization must ensure that the computers that store the financial records of its clients and customers will be destroyed and cannot be recovered by any means. To ensure a business is compliant and adheres to federal and state guidelines for data destruction, this also extends to sanitizing data on all electronic and non-paper media, including hard drives, flash drives and cell phones.
For financial service firms with HFT, where personal information is exchanged online at the speed of light, it’s more important than ever to have a trusted provider of secure data destruction services to prevent sensitive information from getting into the hands of bad actors.
Liquid Technology provides best-in-class solutions for effective, compliant and reliable destruction of sensitive data. Providing a convenient way to improve company security while also addressing confidentiality concerns, Liquid Technology can safely and securely perform computer hard drive destruction and other data wiping or degaussing services. The company works with many of the leading high-frequency trading firms in the world. When computer data is eliminated in adherence to National Institute for Systems and Technology (NIST) standards, financial services organizations can be ensured that all their recorded information is thoroughly destroyed, and that their hard drives are either rendered unreadable, physically destroyed, or cleansed, meaning that the drives can be re-used.