Deferred Decisions Hitting Vendors Hard In £2.4 billion UK Financial Trading Technology Market

Investment in trading and related technologies by UK-based financial trading institutions during 2002 is forecast to be around 40% lower than 2001, according to the latest edition of the UK Dealing Room Survey published by the independent technology market research and advisory company Kimsey Consulting.

The UK, with more than 31,000 trading positions on the sell-side of the market, is Europe’s largest market for financial trading technology. The latest edition of The UK Dealing Room Survey surveyed respondents with direct responsibility for around 15,000 trading positions.

Whilst the cyclical demand for trading and related technologies was predictably impacted by Y2K projects, few vendors forecast the continued drop in demand resulting from the increasing number of firms (estimated by the survey to be around one-third of institutions) delaying purchasing and implementation decisions.

Providers of packaged solutions are likely to feel the squeeze most, as spending by their traditional target markets (lower and middle tier institutions) appears to be tightening at a quicker pace than at the top-end of the market, where the majority of IT development is undertaken either in-house or under long term contract.

An increase in demand for trading and related technologies in the UK is not likely to return till around 2004, whilst continued market, economic and political uncertainties could see demand falling further.

Commenting on the survey findings, Stephen Kimsey, lead-consultant at Kimsey Consulting said, "One of the key challenges currently facing technology vendors is the appropriate re-positioning of their products to meet the evolving requirements of the market. Buyers want longer operational life for systems, lower cost of ownership and easier system expansion/contraction."

The UK Dealing Room Survey provides coverage of all the key financial trading technologies – from market data and applications through to dealer boards, business continuity and consultants. Data coverage includes market share, market size, spend and demand and also buyer and user comments on vendors, systems and market issues.

Key results as follows:

§ Market Data Vendors – Reuters is the major provider of market information, with approximately 40% market share, and just under 50% share of all information service budgets. The number two player is Bloomberg, with Moneyline/Telerate and Thomson Financial vying for third spot. Reuters achieves the highest overall customer satisfaction ratings.

§ News Wires – Although Reuters is the dominant provider of news wire services to the UK financial trading community, Dow Jones Newswires achieves the accolade of "Best Rated Service" from their customers.

§ Internet-Based Services – around 45% of institutions provide traders with direct access to the Internet, with FT.com being the most frequently accessed service.

§ Market Data Feed Platforms – Reuters Triarch is the dominant system.

§ Electronic Trading Platforms – used by around 97% of the market.

§ Hardware – Compaq has marginally higher share of the desktop market than Dell, whilst remaining the dominant vendor of server hardware. Increasing proportion of the market now buys hardware direct from the vendor.

§ Trading Room Applications – integrated trading and risk management applications are increasingly prevalent. The trading applications sector (worth more than £650 million annually) remains highly fragmented.

§ Dealer Boards – Syntegra and IPC are the two major vendors in the UK, though Etrali (a subsidiary of France Telecom) achieves the highest customer satisfaction ratings.

§ Consultants – few consultants achieve above a satisfactory rating, other than Reuters with the majority of clients rating them as either good or very good.

§ Technology Purchasing – increasingly oriented toward business area.

§ Key Issues for Trading Technologists – the most frequently mentioned issue was the cost of technology, followed by issues relating to data sourcing and management.

The survey also suggests that technology buyers are favouring journals and other printed media (including electronic media) as a source of market news, over exhibitions and conferences.

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