Bob Santella, head of SunGard’s capital markets US trading software and brokerage business, said, “The trading landscape continues to evolve, becoming more fragmented and regulated. This is creating challenges for trading firms seeking new revenue opportunities without incurring extra costs. SunGard is helping firms capitalize on changes in market structure by providing reliable, low latency trade execution and global exchange connectivity with integrated risk controls to help our customers compete in the race for liquidity.”
The ten trends that SunGard has identified as shaping electronic trading in 2012 can be grouped under the themes of transparency, efficiency and networks. They are:
1. Regulations for increased transparency will drive OTC derivatives trading to become increasingly electronic, with its processes and technologies converging with those used for listed market trading.
2. The consolidated ticker that has been proposed in MiFID II will help firms view and analyze the same post-trade data, increasing transparency across Europe and leveling the playing field.
3. Broker-dealers will need greater automation of order management and trading processes to help drive down costs as brokerage commissions continue to be under severe pressure.
4. Sell-side firms will consider reducing upfront and ongoing technology maintenance costs via outsourcing and ASP or SaaS-based solutions
5. In general, algorithmic trading has become commoditized, so brokerage firms will buy more sophisticated algorithms – or purchase the tools to build them – to help maintain the profitability of their algorithmic trading operations.
6. Firms will need to adopt complex event processing techniques to help ensure that trade orders arrive at different exchange venues at the same time and avoid giving away information about their orders to the competition.
7. Exchange consolidation is reducing the number of technologies required to access liquidity, making it less expensive to maintain additional connections to more trading venues.
8. To help them remain competitive, the largest sell-side firms will need to offer a broad, global network of exchange connectivity that includes emerging markets, as well as provide direct market access and services around different asset classes.
9. Smaller trading firms will stay competitive by focusing on geography or market sector (e.g. technology or global mid-caps), which will attract buy-side firms that are looking for specialized expertise.
10. FIX is becoming the market standard across not only execution data but market data, allocations and other asset classes, and investment firms will increasingly adopt it in order to help reduce their integration costs.
Laurie Berke, principal at TABB Group, noted in “Execution Consulting: The Next Generation in Sales Trading” report that, “By 2013, the way in which the sell-side services its clients will look substantially different from today. Buy-side traders are demanding innovation, new tools and new technology solutions. More importantly, traders are beginning to seek out value-added insight from their electronic trading providers to provide data, analysis, insight and guidance that will result in quantifiable reductions in trading costs and positive performance.”