I read a news story yesterday about nobel laureate Mario Vargas Llosa, who claims that the internet has made us a less serious and deep thinking people. The thrust of the claim by the Peruvian-born winner of this year’s prize for literature is that the internet is driving everyone to a shorter attention span focused on entertainment, at the expense of advancing deeper and more philosophical topics that drive the evolution of culture.
Fast forward a day and I was pleased to see A-Team Group publish a thoughtful article on how FPGAs and hardware, which have long been accepted in the front office, are making headway in risk management and order processing. This is inline with our own observation that projects and budgets in the mid- and back-office are getting increased priority.
If you draw a parallel between his point and capital markets IT, high-frequency trading has been the Lindsay Lohan of Wall Street tech for the last few years — when it comes to driving traffic to your publication/site, focusing on high frequency trading is a favorite tactic among editors and analysts.
But while HFT gets a disproportionate amount of attention it actually represents a smallish portion of the total capital markets IT spend. Using our market of messaging middleware as an example, about 10% of spending is on “low latency” messaging, while guaranteed or transactional messaging represents about 90% of the market.
This ratio has always reminded me of Sigmund Freud’s belief that 10% of the mind’s activity is consumed by the front-and-center conscious mind (i.e. the front office) and 90% is in the less visible area of the unconscious (i.e. the back office). I’m getting a little deep into mixed metaphor soup here, but it is unlikely that Freud was suggesting that back office employees have unresolved issues with their mothers.
Still, I like the idea of extending Vargas Llosa’s observation into capital markets dialog. I think we need to spend more time talking about the far less explored area of (Freud’s) back office, and it’s OK if that comes at the expense of the over-covered world of (Lindsay Lohan’s) high frequency trading.