Electronic trading to drive market transformation

Electronic trading to drive market transformation

Expanded electronic trading will be the main driver of change in the European financial markets over the next ten years, according to a joint study by IBM and the Economist Intelligence Unit.

The study, which is based on a global survey of of over 400 executives who run the world's exchanges, brokerages, hedge funds and regulatory bodies, predicts that the world's financial markets are about to move into a transformational phase with "a rate of change unseen since the 1970s".

In Europe, over 80% of buy side and sell side executives cited 'expanded electronification of instruments' as the number one driver of change over the next ten years through to 2015.

The study suggests that retail investors stand to gain most from the automation of European financial markets. Meanwhile the middlemen - traders, analysts, fund managers - "will come under withering pressure to deliver or depart". IBM says the end result will be the evaporation of agency profits and the restructuring of business and operating models around investors.

Overall the study predicts that the European financial landscape will be dominated by a few larger stock exchanges. Suzanne Dence, senior consultant, financial markets industry, IBM Institute for Business Value, says these exchanges will need to adapt to the dramatic increase in transparency and speed of operations and focus on new ways to provide value and service to customers

"While exchanges provide a level of unique value in providing surety about the counterparty that you are dealing with, much of the rest of their service is little more than a glorified eBay," says Dence.

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