Third party vendors the winners as trading technology trends shift

Third party vendors the winners as trading technology trends shift

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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