Overall, buy-side trading desk budgets are expected to hold relatively flat in 2018 at $17.3 billion industry-wide. Back in 2015, 70% of that budget would have been paid to compensate traders, with the remaining 30% going to technology.

In 2018, that allocation is expected to shift to just 60% compensation and 40% technology, says Kevin McPartland, co-author of the Greenwich report.

“Although part of this year’s shift can be attributed to the effects of new MiFID II rules on research and pre-trade transparency, the more general increase in technology spending at the expense of trader compensation represents a secular trend,” he says.

The movement to technology spending has been most pronounced in fixed income. Initially, much of this increased spending went to gaining access to fixed-income e-trading venues. More recently, a bigger share of this spend is being used on data and the analytics to put that data to work.

Institutional investors see these investments as well worth the cost. “Until very recently, most asset managers viewed their trading desks as a cost center,” says Brad Tingley, Greenwich institutional analyst. “Today, they are seen as profit centres, due to their ability to create an advantage over competitors with better execution.”

The growing emphasis on data is evident across asset classes. Market data terminals and order management systems (OMS) account for approximately half of technology spending on institutional trading desks. However, this allocation to hardware is also showing a slight decrease, with much of the uptick in spending occupying data-intensive disciplines, such as transaction cost analytics (TCA) and risk management, portfolio construction, and counterparty risk calculations.