Institutional investors around the world spent more than $12 billion on their trading desks last year as they raced to keep pace with the growing speed of electronic markets, changes in market structure and lower trading costs, according to a report from Greenwich Associates.
While most spending goes on paying the trading talent, around a third of budgets go on technology - software, hardware and infrastructure, says Greenwich, which interviewed 358 buy-side traders from around the world.
Order Management Systems and market data terminals remain the top two technology expenses for buy-side traders, accounting for 53% of the total tech budget.
Nearly two thirds of technology spend went to fixed income, where increasing amounts of trading volume is migrating to electronic platforms. Fixed-income trading desks saw spending up 11% from 2013, with trader compensation on the rise.
"Although the fixed-income market is awash with new data and trading protocols, relationships are still king,” says Kevin McPartland, head, market structure research, Greenwich Associates. “The best technology platforms are of little use without traders who know the unwritten rules of trading bonds - especially when volatility comes back and interest rates rise."