According to the report, 'European Financial Markets Technology Strategies, 2001 - 2004', overall investment in IT by European financial markets currently stands at $21.1bn and is set to increase significantly.

Spending on STP and risk management technologies will grow at 16% and 10% a year respectively, between 2001 and 2004, says the report, presenting lucrative revenue opportunities for vendors, particularly within the asset management space.

In monetary terms, investment by European financial markets in STP technologies is forecast to grow from $1.5bn in 2002 to $1.9bn in 2004. Meanwhile investment in risk management technologies is projected to reach $728m by 2004 from $533m in 2002.

Ravi Chauhan, Datamonitor technology analyst, says the recent raft of risk-related corporate scandals including the massive trading losses at Allfirst, coupled with the growing appetite for credit rating agencies to downgrade corporate ratings in addition to proposed revisions to the Basel Capital Accord have escalated the importance of risk management. At the same time, the imminent arrival of virtual matching utilities will spur institutions to invest in intra- and inter-party STP efficiencies, he says.

Chauhan says the asset management line of business present the biggest opportunity, as the need to increase automation with custodians, broker/dealers and third-party increases. Currently accounting for 16% share ($3.5bn) of total European financial market spend on IT, investment in asset management technologies will grow at a compound annual growth rate of 5.5% to reach $3.9b by 2004 forecasts Datamonitor.

Chauhan concludes: "Although 2002 will still see nominal spend directed towards the internal IT function as institutions continue to pare back discretionary spending as part of the drive to generate internal operational efficiencies and remove costs, the focus will revert to external vendors in late 2003, particularly those playing into the STP and risk management areas in the medium-term."