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Third party vendors the winners as trading technology trends shift

13 March 2014  |  6421 views  |  0 Canary wharf buildings

Technology innovation in equity markets has changed direction as the race-to-zero latency and the pursuit of high-frequency trading cools, says capital markets consultancy GreySpark partners

In newly-published research examining trading trends for the year ahead, GreySpark says that the technology focus at most firms now rests on the convergence of high-touch and low-touch trading platforms.

Banks looking to reduce their trading platform costs will simplify and consolidate their platforms where possible, says the consultancy.

GreySpark believes that the coming 18-to-24 months will witness many banks eliminate the need for separate low-touch and high-touch trading platforms as they invest in consolidated third-party vendor offerings.

This belief is furthered by a trend towards independent packaged software as the technology stack has become commoditised, and only those functions that offer a competitive advantage will be maintained in-house.

The research suggests that equity markets are at a turning point as large sellside flow houses and prime brokers prosper again while boutique offerings grow their aggregate market share.

The remaining players, primarily mid-size firms, must adapt and downsize their pre-crisis investments in high maintenance large-scale, industrial trade processing platforms in favour of saas-based and shrink-wrapped plug and play platforms from third party suppliers.

The forecast will be music to the ears of hard-pressed trading technology houses, which have suffered lean pickings over the past five years as equity trading volumes slumped and firms scaled back their tech spending.

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