Speaking at City IT, Robert Hegarty, research director of US consultancy Tower Group, said that the six-month old Liquidnet trading system, backed by the firms, currently matches 40% of shares at midpoint prices without negotiation.
A further 30% of trades are completed with just one back-and-forth communication, and the average trade size is now 72,000 shares.
Liquidnet, he said, is an example of how the rogue music swapping site Napster has helped to speed up the adoption of peer-to-peer computing in the financial sector.
Another service is WorldStreet, a peer-to-peer managed service backed by 25 firms, including Deutsche Bank, ING, Scudder and Janus, which consolidates analyst/trader information.
Peer-to-peer computing, a technology that allows one computer to share files, data, processing power, programs, and all other contents with another computer, has been around for many years. It was popularised by Napster and is now becoming more widely adopted across all industries, said Hegarty.
Hegarty said that the P2P revolution is being driven by a variety of factors:
- Information overload - it allows firms to filter information shared externally and internally
- Popularisation by Napster
- Increase in processing power on the desktop
- Huge available bandwidth
- Refined search technologies
Take-up, particularly by medium-sized and small firms, of the Financial Information Exchange protocol, which enables traders to bypass brokers and dealers, also points to the growth of peer-to-peer computing in financial services, he added.
Ten tips for e-success
The key factors for e-commerce success, according to Julian Costley, UK director, Escador, speaking at City IT, are:
1. Have a good management team
2. Have an innovative, defensible idea that really needs e-commerce to succeed
3. Ensure that there is a existing market - it is better to have 3% of a £50m market than 30% of a £5m market and do not push too far ahead of everybody else
4. Keep operating costs low - do not aim to win on price, but on profitability and ability to weather margin pressure
5. Choose a direct revenue model and sell a service or a transaction - do not assume volumes of users or page impressions guarantees a successful business
6. Keep it simple
7. Balance promoting online and offline - do not forget that the online market influences offline purchasing
8. Watch acquisition costs - aim to recover costs of acquiring an online customer within six months
9. Make the customer the centre of all activities - but do not be too intrusive
10. Shareholder value - you have to be in profit extremely quickly - understand the basis for the valuation of your business and aim for cash neutrality within 12 months