TowerGroup Sees Growth of Peer to Peer (P2P) Technology

While peer-to-peer (P2P) computing has been in existence for many years, only since the advent of Napster have broader consumer and business segments begun to understand its power. New TowerGroup research finds that the peer-to-peer model is poised to penetrate the investment management industry-providing a more simplified and automated workflow process that will allow participants in the financial services community to be linked directly to parties likely to transact in the same products.

Highlights of the research include the following:

• Not since the introduction of the Netscape browser has the Internet been filled with as much promise as the emerging peer-to-peer (P2P) movement. In the same way that Netscape made information on the Web accessible to the masses, peer-to-peer computing will allow forward-thinking firms to more fully exploit the Internet, while enabling customers to take advantage of information and computing power like never before.
• Two new peer-to-peer systems hope to reshape the investment management community: Liquidnet and WorldStreet. Liquidnet aims to build the largest liquidity pool exclusively for buy-side traders, thereby redefining buy-side trader workflow and potentially the market for block orders. WorldStreet focuses on building peer network solutions that will allow financial institutions to share information on a targeted basis. Combining a new concept called "package routing" with traditional customer relationship management (CRM) capabilities, WorldStreet intends to become the "control panel" for the buy side by enabling users to access peer network capabilities within their existing workflow applications.
• Security is one of the most important concerns for firms deploying peer-to-peer technology. P2P allows for more open communication between any two previously unconnected desktop machines-which raises red flags for any financial application.
• TowerGroup believes that the growth of peer-to-peer may have significant impact on business-to-business exchanges. Employing P2P would simplify the workflow process and provide a more open, community-owned model. This would enable the broker to reconnect directly with the investment manager without going through an intermediary, currently represented by the B2B exchanges.

"Peer-to-peer computing is the next great Internet-enabling technology. Not since the first demonstration of a World Wide Web browser has the true potential of the Internet been so apparent," said Rob Hegarty, director of TowerGroup's Investment Management practice and author of the research. "TowerGroup expects widespread adoption of P2P technologies in all facets of financial services, particularly in investment research and electronic marketplaces. As P2P technology becomes more prevalent and accepted, it could go so far as to usurp the plethora of B2B exchanges."

Mr. Hegarty's 12-page research report titled "Leveraging the Napster Model: Peer-to-Peer (P2P) Computing Penetrates the Buy Side," is available to qualified members of the press for review.

About TowerGroup

TowerGroup is a leading provider of information technology research, advisory and consulting services specializing in topics critical to the global financial services industry. TowerGroup conducts research addressing banking, securities, investments, and insurance information technology, products, vendors, markets, investment trends and issues. Headquartered near Boston, Massachusetts, and with offices serving Europe and Latin America, TowerGroup serves a global client base, which includes some of the world's largest financial services, technology and consulting firms. For additional information, visit TowerGroup online at www.towergroup.com.

Contact Sandra Kowalski of TowerGroup, 781-292-5298, sandra.kowalski@towergroup.com.