A study by the TABB Group estimated that the top 15 swap dealers will invest $385 million as part of a move towards a central clearing facility.
The top 15 banks will spend a further $290 million on technology to ensure more efficient workflow processes to replace existing systems, the report revealed.
These increases in investment will be coupled with a rise in the number of dealers handling swaps, which the group predicted would be up to 30 by 2011.
Kevin McPartland, a TABB senior analyst and author of the report, said: âThe OTC derivatives market is in for revolutionary rather than evolutionary change.
âPhones wonât disappear, high-frequency swaps trading will not be born overnight, but the area in between will see these markets grow. While existing bulge-bracket dealers will not die, theyâll change as new dealers emerge with fresh approaches and innovative technology, grabbing a part of the market.â
The group stated that regulations concerning OTC Derivatives need to be drawn up by regulatory bodies and implemented by July 2011.
By Jim Ottewill