Survey of buy-side, sell-side and proprietary derivatives trading firms reveals a push for re-examining current infrastructure as trading volumes and market complexity expand
The pace of change in the derivatives industry is forcing firms to re-evaluate their technology strategies, with half of the firms responding to a TABB Group survey planning to implement a new trading platform in the next three years. TABB’s research based on this survey, “Derivatives Trading Technology: Structural Complexity Driving Next Generation Demands,” examines the factors that drive investment decisions in derivatives trading platforms as regulation and structural complexity drive market participants’ technology investment choices.
Concerns around regulations, lack of technology resources and the need to have superior client service were the top themes permeating TABB’s survey responses, with more than half of all participants citing regulatory and compliance complexity as their biggest challenge. TABB partner and global head of research and consulting Andy Nybo, who co-authored the report, explains that making sense of the rapidly evolving market structure and mosaic of new products has become a daily challenge as the tools at hand are quickly becoming obsolete. Best in class requirements now span multiple asset classes, geographies and regulatory mandates, making the need to replace antiquated systems a strategic necessity.
However, once a firm rationalizes the need to replace a trading platform, TABB explains it is not an easy decision and there are inevitable delays throughout the vendor selection process. Further, budget constraints often dictate timelines and force firms to delay upgrade cycles and replacement strategies. Given these obstacles, many firms are opting to retire their legacy systems and replace with flexible independent software vendor (ISV) offerings that provide enhanced functionality at a lower cost.
“The challenges facing the derivatives industry are forcing almost every market participant to be nimble and make adaptions for survival,” said report co-author and TABB senior analyst Tom Lehrkinder. “Multi-product, multi-broker, co-location and cross-asset are today’s buzz words while speed, straight-through processing and distributed computing dominates connectivity and post-trade activities. The natural progression is to look to technology as a solution.”
The 19-page, 10-exhibit report is available for download by TABB derivatives clients and pre-qualified media at https://research.tabbgroup.com/search/grid. For more information or to purchase the report, contact info@tabbgroup.com.
