Capital Markets Trading Technology Strategies
Introduction
Despite improvements in European financial markets, persistent lethargic conditions have meant that technology investments are still shape
April 9, 2007 (Press Release) --
Introduction
Despite improvements in European financial markets, persistent lethargic conditions have meant that technology investments are still shaped by cost and efficiency drivers. However, growth initiatives are increasing, although selectively. Where are the opportunities for trading vendors and how should they go to market? How should institutions operate and where can technology be best utilized?
Scope of Capital Markets Trading Technology Strategies report
Highlight trends and key areas of activities within capital markets sell-side trading sectors
Map out a picture of the market landscape, competitive dynamics and vendor strategies for trading solution vendors
Deliver strategic implications for both institutions & vendors, based on evolving market, competitor & financial services end-user dynamics.
Provide market opportunities & forecasts for applications expenditure across asset management, brokerage and private banking sectors
Research and analysis highlights
Driven by the uncertainty in the broader capital markets environment as a whole, trading related technology spend will be focused on two tenets: building capability for product innovation, and operating a lean and mean organization
Larger Tier 1 banks with strong franchises in specific asset classes will continue to provide a market for asset-aligned trading specialists, but there will be increasing pressures to create cross asset capability
Amongst established end-user segments, institutional brokerages will still contribute the largest area of application spend, although asset management and private banking sectors will provide the highest growth at more than 8% CAGR
Key reasons to read Capital Markets Trading Technology Strategies report
Understand trends and key areas of activities within capital markets sell-side trading sectors
Gain insight into how the interplay of end-user trading, regulation & FSI dynamics are driving a renewed focus in growth initiatives & IT investments
Obtain market forecasts for application spend across the various market participants
Table of Contents :
EXECUTIVE SUMMARY
3
KEY FINDINGS
4
The future decoded
4
Competitive dynamics and strategic implications
4
Strategic implications for vendors
5
Strategic implications for institutions
5
CHAPTER 1 INTRODUCTION
11
What is this report about?
11
CHAPTER 2 MARKET CONTEXT
12
European trading - overview
12
Business drivers and trends
12
Regulation and political developments in the EU are not only imposing increased operating overheads but also changing the market structure and competition dynamics
12
Two years on from the trough of the downturn, cost firmly remains a strong business and IT driver in capital markets environment
14
Aggressive search for growth in higher-margin activities continues
14
Innovation and growth in complex derivatives products for financial risk management
16
Increasing emphasis on middle-office functions, especially credit and operational risk management activities
17
Integration of equities and fixed income sales and trading continues to be a feature
19
The rise of algorithmic (quantitative) trading in the US and increasingly in Europe
19
CHAPTER 3 BUSINESS / TECHNOLOGY IMPLICATIONS
22
The focus on data management now extends to underline end-to-end processes and applications
22
The return of STP, but not as we know it
23
External STP improvements are slow due to the complexity of the trade flow lifecycle amongst multiple parties involved
24
Evolution of product-centric systems towards multi-product back-office operations
26
Back-office restructuring momentum extends beyond IT infrastructure and applications consolidation
27
CHAPTER 4 THE FUTURE DECODED
30
Package application spend by end-user segment
30
Amongst established end-user segments, institutional brokerage will still be the largest area of application spend, although asset management and private banking will provide the highest growth
30
Hedge funds represent a continuing high-growth area for technology spend as 'middle-sized' firms emerge and competition heats up in the prime brokerage sector
31
Institutional brokerage - application spend by front, middle and back office
32
Driven by the uncertainty in the broader capital markets environment as a whole, trading-related technology spend will be focused on two areas: building capability for product innovation, and operating a lean and mean organization
32
CHAPTER 5 COMPETITIVE DYNAMICS
34
Introduction
34
Vendor offerings
34
Vendor landscape and implications
37
Strategic implications for vendors
38
Larger tier 1 banks with strong franchises in specific asset classes will continue to provide a market for asset specialists, but there will be increasing pressures to create cross-asset capability
38
The race for cross-asset, front-to-back systems will be based on strong asset class coverage that provides best-in-class (or near best-in-class) functionality across trading classes, especially for vendors taking the 'pre-configured' packaged approach.
38
For risk management specialists, there will be mounting pressures to marry best-of-breed risk-related data, application and analytics provision.
39
Increasingly, exceptions management functionality will be "bundled" into front-to-back systems
39
The combination of new wave technologies will lower the cost-performance curve - but the real question will be what applications will drive take-up in the next wave
40
Strategic implications for institutions
42
Capital markets institutions must develop a stronger mandate for integrated risk management across asset classes, and between front to back functions
42
Capital markets institutions need to streamline the product manufacturing process to address the risks inherent in the financial engineering of complex products
43
Capital markets institutions need to further adopt component-based approaches and accelerate componentization within applications development activities
44
Conclusion
46
CHAPTER 6 APPENDIX
47
Definitions / Abbreviations
47
Relevant readings
52
Strategic Planning Program (SPP) writing team
52
List of Tables
Table 1: Packaged application spend by end-user segment, 2004-2006
30
Table 2: Institutional brokerage application location spend, 2004-2006
32
List of Figures
Figure 1: Vendor landscape and strategic positioning
4
Figure 2: Key drivers of IT strategy in European financial markets
14
Figure 3: Capital markets businesses - the search for margins & growth
15
Figure 4: Growth in Derivatives, 2001-2004
16
Figure 5: Enterprise risk management
18
Figure 6: Algorithmic trading growth, 1994 - 2004
20
Figure 7: Data management - business and IT considerations
22
Figure 8: STP - not as it was previously
23
Figure 9: Trade flow lifecycle
25
Figure 10: Leveraging synergies across asset-specific applications
26
Figure 11: Restructuring trends
28
Figure 12: European packaged application spend by end-user segment, 2004-2006
30
Figure 13: Institutional brokerage application location spend, 2004-2006
32
Figure 14: Trade flow value chain / segments
34
Figure 15: Vendor offering matrix
35
Figure 16: Trading institutions' approach to IT core systems development
36
Figure 17: Vendor landscape and strategic positioning
37
Figure 18: Adoption framework - next-generation computing
41
Figure 19: Sell-side focus for improving operational functions
42
Figure 20: Product design - Structured products / trades example
44
Figure 21: Componentization and component-based approaches in the middle and back office
45
Related Reports :
US Capital Markets Trading Technology Strategies
China Capital Markets Handbook 2005
Equity Capital Markets 2006
Fixed Income & Debt Capital Markets 2006
International Capital Markets 2nd Edition
International Debt Capital Markets Handbook 2007
International Equity Capital Markets Handbook 2005/06
MiFID : Convergence towards a unified European capital markets industry
For more information kindly visit
http://www.bharatbook.com/detail.asp?id=7804
Despite improvements in European financial markets, persistent lethargic conditions have meant that technology investments are still shaped by cost and efficiency drivers. However, growth initiatives are increasing, although selectively. Where are the opportunities for trading vendors and how should they go to market? How should institutions operate and where can technology be best utilized?
Scope of Capital Markets Trading Technology Strategies report
Highlight trends and key areas of activities within capital markets sell-side trading sectors
Map out a picture of the market landscape, competitive dynamics and vendor strategies for trading solution vendors
Deliver strategic implications for both institutions & vendors, based on evolving market, competitor & financial services end-user dynamics.
Provide market opportunities & forecasts for applications expenditure across asset management, brokerage and private banking sectors
Research and analysis highlights
Driven by the uncertainty in the broader capital markets environment as a whole, trading related technology spend will be focused on two tenets: building capability for product innovation, and operating a lean and mean organization
Larger Tier 1 banks with strong franchises in specific asset classes will continue to provide a market for asset-aligned trading specialists, but there will be increasing pressures to create cross asset capability
Amongst established end-user segments, institutional brokerages will still contribute the largest area of application spend, although asset management and private banking sectors will provide the highest growth at more than 8% CAGR
Key reasons to read Capital Markets Trading Technology Strategies report
Understand trends and key areas of activities within capital markets sell-side trading sectors
Gain insight into how the interplay of end-user trading, regulation & FSI dynamics are driving a renewed focus in growth initiatives & IT investments
Obtain market forecasts for application spend across the various market participants
Table of Contents :
EXECUTIVE SUMMARY
3
KEY FINDINGS
4
The future decoded
4
Competitive dynamics and strategic implications
4
Strategic implications for vendors
5
Strategic implications for institutions
5
CHAPTER 1 INTRODUCTION
11
What is this report about?
11
CHAPTER 2 MARKET CONTEXT
12
European trading - overview
12
Business drivers and trends
12
Regulation and political developments in the EU are not only imposing increased operating overheads but also changing the market structure and competition dynamics
12
Two years on from the trough of the downturn, cost firmly remains a strong business and IT driver in capital markets environment
14
Aggressive search for growth in higher-margin activities continues
14
Innovation and growth in complex derivatives products for financial risk management
16
Increasing emphasis on middle-office functions, especially credit and operational risk management activities
17
Integration of equities and fixed income sales and trading continues to be a feature
19
The rise of algorithmic (quantitative) trading in the US and increasingly in Europe
19
CHAPTER 3 BUSINESS / TECHNOLOGY IMPLICATIONS
22
The focus on data management now extends to underline end-to-end processes and applications
22
The return of STP, but not as we know it
23
External STP improvements are slow due to the complexity of the trade flow lifecycle amongst multiple parties involved
24
Evolution of product-centric systems towards multi-product back-office operations
26
Back-office restructuring momentum extends beyond IT infrastructure and applications consolidation
27
CHAPTER 4 THE FUTURE DECODED
30
Package application spend by end-user segment
30
Amongst established end-user segments, institutional brokerage will still be the largest area of application spend, although asset management and private banking will provide the highest growth
30
Hedge funds represent a continuing high-growth area for technology spend as 'middle-sized' firms emerge and competition heats up in the prime brokerage sector
31
Institutional brokerage - application spend by front, middle and back office
32
Driven by the uncertainty in the broader capital markets environment as a whole, trading-related technology spend will be focused on two areas: building capability for product innovation, and operating a lean and mean organization
32
CHAPTER 5 COMPETITIVE DYNAMICS
34
Introduction
34
Vendor offerings
34
Vendor landscape and implications
37
Strategic implications for vendors
38
Larger tier 1 banks with strong franchises in specific asset classes will continue to provide a market for asset specialists, but there will be increasing pressures to create cross-asset capability
38
The race for cross-asset, front-to-back systems will be based on strong asset class coverage that provides best-in-class (or near best-in-class) functionality across trading classes, especially for vendors taking the 'pre-configured' packaged approach.
38
For risk management specialists, there will be mounting pressures to marry best-of-breed risk-related data, application and analytics provision.
39
Increasingly, exceptions management functionality will be "bundled" into front-to-back systems
39
The combination of new wave technologies will lower the cost-performance curve - but the real question will be what applications will drive take-up in the next wave
40
Strategic implications for institutions
42
Capital markets institutions must develop a stronger mandate for integrated risk management across asset classes, and between front to back functions
42
Capital markets institutions need to streamline the product manufacturing process to address the risks inherent in the financial engineering of complex products
43
Capital markets institutions need to further adopt component-based approaches and accelerate componentization within applications development activities
44
Conclusion
46
CHAPTER 6 APPENDIX
47
Definitions / Abbreviations
47
Relevant readings
52
Strategic Planning Program (SPP) writing team
52
List of Tables
Table 1: Packaged application spend by end-user segment, 2004-2006
30
Table 2: Institutional brokerage application location spend, 2004-2006
32
List of Figures
Figure 1: Vendor landscape and strategic positioning
4
Figure 2: Key drivers of IT strategy in European financial markets
14
Figure 3: Capital markets businesses - the search for margins & growth
15
Figure 4: Growth in Derivatives, 2001-2004
16
Figure 5: Enterprise risk management
18
Figure 6: Algorithmic trading growth, 1994 - 2004
20
Figure 7: Data management - business and IT considerations
22
Figure 8: STP - not as it was previously
23
Figure 9: Trade flow lifecycle
25
Figure 10: Leveraging synergies across asset-specific applications
26
Figure 11: Restructuring trends
28
Figure 12: European packaged application spend by end-user segment, 2004-2006
30
Figure 13: Institutional brokerage application location spend, 2004-2006
32
Figure 14: Trade flow value chain / segments
34
Figure 15: Vendor offering matrix
35
Figure 16: Trading institutions' approach to IT core systems development
36
Figure 17: Vendor landscape and strategic positioning
37
Figure 18: Adoption framework - next-generation computing
41
Figure 19: Sell-side focus for improving operational functions
42
Figure 20: Product design - Structured products / trades example
44
Figure 21: Componentization and component-based approaches in the middle and back office
45
Related Reports :
US Capital Markets Trading Technology Strategies
China Capital Markets Handbook 2005
Equity Capital Markets 2006
Fixed Income & Debt Capital Markets 2006
International Capital Markets 2nd Edition
International Debt Capital Markets Handbook 2007
International Equity Capital Markets Handbook 2005/06
MiFID : Convergence towards a unified European capital markets industry
For more information kindly visit
http://www.bharatbook.com/detail.asp?id=7804
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