January is a great time of year for new trend articles, so it is fitting we have 10 Trends in Electronic Trading to share today. With the New Year taking shape, we have identified trends in electronic trading that are driving capital markets decision makers to act. We are seeing the trading landscape continuing to evolve across the globe, with regulation, automation and connectivity driving the changes.
To give context to these 10 trends, we have divided them into the themes of transparency, efficiency and networks. They are:
Transparency:
1. Regulations for increased transparency will drive OTC derivatives trading to become increasingly electronic, with its processes and technologies converging with those used for listed market trading.
2. The consolidated ticker that has been proposed in MiFID II will help firms view and analyze the same post-trade data, increasing transparency across Europe and leveling the playing field.
Efficiency:
3. Broker-dealers will need greater automation of order management and trading processes to help drive down costs as brokerage commissions continue to be under severe pressure.
4. Sell-side firms will consider reducing upfront and ongoing technology maintenance costs via outsourcing and ASP or SaaS-based solutions.
5. In general, algorithmic trading has become commoditized, so brokerage firms will buy more sophisticated algorithms – or purchase the tools to build them – to help maintain the profitability of their algorithmic trading operations.
6. Firms will need to adopt complex event processing techniques to help ensure that trade orders arrive at different exchange venues at the same time and avoid giving away information about their orders to the competition.
Networks:
7. Exchange consolidation is reducing the number of technologies required to access liquidity, making it less expensive to maintain additional connections to more trading venues.
8. To help them remain competitive, the largest sell-side firms will need to offer a broad, global network of exchange connectivity that includes emerging markets, as well as provide direct market access and services around different asset classes.
9. Smaller trading firms will stay competitive by focusing on geography or market sector (e.g. technology or global mid-caps), which will attract buy-side firms that are looking for specialized expertise.
10. FIX is becoming the market standard across not only execution data but market data, allocations and other asset classes, and investment firms will increasingly adopt it in order to help reduce their integration costs.
Is there a trend that stands out to you as most significant? Can you think of trends that are missing from this list? Please leave a comment below with your own thoughts or questions about these trends. I think we can agree that these 10 trends convey the makings of a very interesting 2012.
While you’re here…
- See the full press release for more on TEN Trends in Electronic Trading.
- Explore how you can trade globally and optimize locally with Valdi and SGN.
- Learn about Front Arena for dynamic position control.
Leveraging LSOC Opportunities
Hi Tim,
I believe we can include a fourth theme – Customer.
I see a trend towards the offering of bespoke electronic trading solutions as a key differentiator, as the market becomes saturated with commoditized offerings. Optional deliveries, third-party deliveries, cross-market structures, multi-currency splits and settlements, multi-account allocations, trade execution that gets around regulatory limitations, and more … and all of that with efficient STP process, near-real-time confirmations etc will push the e-trading solution leaders ahead of the pack.
Regards
Gary
Hi Gary
When thinking about trends outside electronic trading, I agree that electronification of processes for customer service is very important.
To me there are two key dimensions influencing banks’ IT spend this year: new revenue vs. cost reduction and external vs. internal influences. Servicing customers better is an internal decision towards expanding revenues. Moreover, consolidation of IT infrastructure is driven by internal desire for cost reduction and improvements in operational efficiency (this speaks to your point as well). External influences are larger volumes and electronification of markets and, of course regulation.
If you are interested, may I direct you towards this blog post and my white paper “How to Stay Ahead of Your Capital Markets Peers” http://bit.ly/HtSAoYCMP?
Many thanks
Tim D