Vendors Expected to Shine in 2009

22 January 2009

The financial market vendor space looks set to be one of 2009’s few growth sectors. According to Patrick Looney, CEO of Market Vendor Jobs, the specialist recruitment website for the financial technology and information vendor space, the past month has seen a 30% increase in the number of vacancies advertised on the site in such areas as exchange connectivity, market data, banking software, banking technology and trading software, with this trend looking set to continue.

Despite the global financial downturn and mass job losses in many sectors, “a substantial number of vendors are actively recruiting,” says Patrick Looney, adding: “we have seen a significant increase in the number of jobs available over the last month”. Looney explained further: “experienced candidates with an investment banking background have the option of transferring their skills to a number of vendor product areas, including specific asset classes, trading, payments, risk and compliance, whilst still earning a decent living”.

Although vendor salaries are unlikely to match investment banking levels, such roles provide an attractive option for those with an uncertain future. The packages are respectable, the work/life balance tends to be better and it provides specialists with the opportunity to maintain their skill levels during the hiatus. Plus, it’s a good way to regularly keep in touch with those invaluable contacts.

This sense of optimism is echoed by numerous specialists. Ben Collins, Global Sales and Marketing Director at Tenfore Systems, a leading independent market data provider, who have recently been acquired by Morningstar Inc, commented: ”This year we expect to see common trends continue to change. Traditionally, larger procurement departments have sourced their data requirements predominantly from the multi billion dollar vendors. Pressures on cost now mean that they are widening the net of potential suppliers. By focusing on our niche product they realise that they can get high quality product for lower prices, satisfying their need for value for money”.

This theory that companies will be looking to get more bang for their buck is reinforced by Martin Cole, UK Managing Director of SIX Telekurs, the third largest provider of financial information in Europe, who commented: “in 2009 there will be a greater emphasis on providing improved levels of service, with more accurate and timely pricing models”. Adding: “as tighter regulation will inevitably be imposed on the financial markets, the demand for more robust risk management, reporting and surveillance technologies, including quality data sources, will provide further opportunities for vendors to the financial markets”.

Brendan Beith, European sales director of Interactive Data, a leading provider of financial market data, analytics and related services, said: "We believe that a variety of factors, including the continued volatility of the financial markets and the heightened regulatory environment, will continue to drive demand in 2009 for a broad range of financial data, especially in the areas of valuation, reference data and low latency data. There is clearly a higher degree of cost awareness for our clients in the current environment. However, with risk management and compliance becoming growing priorities, we believe that clients will not compromise in their need for essential data. We also believe that quality is always important to our clients and we do not see that changing".

The acknowledgement that tighter financial regulations are expected to have a positive impact in 2009 appears to be a common theme amongst vendor specialists. Herbie Skeete, Managing Director of Mondo Visione Ltd, a leading source of insight and knowledge about the world’s exchanges and trading venues: “The regulatory changes being driven by MiFID in Europe, and Reg NMS in the USA, mean that markets are more fragmented than ever and the premier market vendors are the ones best placed to stitch together these rivulets of liquidity and make sense of the seeming chaos of the markets, irrespective of whether markets are going up, down or sideways".

Last year’s merger of Thomson and Reuters, two of the top data feeds to the financial market, has provided opportunities for other vendors to generate new revenues. From what was originally two sources of information, before the merger, has now been reduced to one, opening up further opportunities for other vendors such as Tenfore Systems, SIX Telekurs and Interactive Data. The merger has created a major rival to Bloomberg, the current leader in providing information, data and analytical software to the financial community. According to David Anderson, editor of Inside Market Data Reference, Thomson Reuters have 34 percent of the market for financial data with Bloomberg at 33 percent, leaving the remaining 33 percent of the market up for grabs.

Also, according to a recent study by industry analyst firm, Tabb Group, as the market continues to fragment, London based brokerage firms are expected to increase IT spending in Europe over the next two years by 3 percent compound annual growth rate (CAGR). It is anticipated that in order to support the changes in the environment, brokers will spend a total of €714.4 million ($977.6 million), €306.6 million ($419.3 million) on external hardware, software and services and a further €407.5 million ($577.3 million) on internal software development. In a recent report published by U.S based research firm, Forrester Research, it predicts that in 2009, US I.T spending will increase by 6.1 percent. According to Andrew Bartels, vice president, principal analyst, and author of the report, the US is not alone “Asia-Pacific is buoyed by China, which accounts for a significant portion of IT spending and also contributes to the regional economy as a destination for exports”. Adding "China will still grow very positively at 6 or 7 percent and I.T spending in Australia will be strong because the economy is boosted by exports to China’. This news coincides with the recent announcement that the UK's Financial Services Authority (FSA) has called on the country's banks to spend nearly £1 billion on new IT systems to speed up the process of paying out compensation to savers if they collapse.

The markets will recover at some stage, they always do. However, in the interim, redundant market participants need to keep abreast of any changes in the market if they are ever to secure a position similar to which they had before the current financial crisis. The continued volatility of the financial markets and the heightened regulatory environment will continue to provide opportunities to the vendor space. Taking these factors into consideration, the vendors to the financial markets look set to provide a ray of light in an otherwise dreary forecast for the year ahead.

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