FIS Blog

Is trading system consolidation the answer to all pains?


Vincent Burzynski | Monday, November 16, 2015

Sell-side firms’ IT infrastructures are often made up of a mass of disparate legacy systems connected by home-grown integrations. That certainly seems to be the reality for many trading firms. The latest research from Aite Group, The shifting sands of global trading – Part 1, finds that the sell side lives up to its reputation for systems complexity. The firms surveyed confirm that they have a large number of trading and risk systems. Only the smaller or most focused firms have just one or two systems in place. In follow-up interviews, few think that is sustainable.

Will that be followed up by action? Seventy-nine percent of firms indicate interest in consolidating their jumble of systems, with the plurality having the strongest interest. Perhaps we will see progress on this front, for this may be as much a practical consideration as an economic reality for sell-side firms.

In fact, Aite Group found that technology and execution quality have risen to the top of competitive differentiators to win and keep buy-side business. And in multiple conversations with the sell side, trading system consolidation is viewed as a major necessity by most and as an opportunity by a select few.

There are certainly significant system renovation and greenfield projects underway in the OTC derivatives world, including inside sell-side firms. That seems to be consuming the most internal technology bandwidth as of 2015.

But sell-side firms do have project renovation in incumbent listed systems underway as well, and a few are taking on the heavy lifting of bringing listed and OTC together more widely in their firms. These efforts are, for now however, focused far more on risk management than trading. Will that change in 2016?

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