Electronic Trading Offerings Must Evolve to Survive, Reveals GreySpark's Annual e-Commerce Report

London - 20 June 2012

  • Over 90 market participants surveyed; buyside and sellside opinions on electronic trading differ significantly
  • Successful e-commerce strategy required to defend sellside franchises


A new report from GreySpark Partners, the capital markets consultancy, has revealed how the electronic trading space has developed, and how it will continue to develop, in the future. Over 90 different firms participated in the annual survey, which benchmarks the progress of market electronification and highlights the growing importance of electronic trading on the new state of the financial markets.

Trends in e-Commerce and Electronic Trading 2012”, delves deeper into the challenges faced by the buy and sellside, and poses how a fully electronically executed trade lifecycle - e-commerce - can help to retain profitability. The report has highlighted that the widespread use of electronic trading is growing, however marks that this progressive uptake in electronic trading and e-commerce solutions is not to gain market share as more asset classes and products are traded electronically, but rather as a form of defensive play, as volumes remain low and margins are compressed.

Associated with this is the growing need for participants to diversify and differentiate offerings. All major banks now offer modern e-commerce solutions that are providing competitive pricing and have full coverage of execution functionality, with a primary focus on FX. However, GreySpark outlines that propositions must now evolve, or sellside franchises will decline. The new regulations have a significant impact on the growth of e-commerce and electronic trading. But far from merely signing the death warrant of single dealer platforms (SDPs) they are accelerating the transition of more products to electronic trading. Incumbents must rethink what their platforms do. GreySpark’s research shows that several routes can be followed: multi assets, post trade services and client centric.

The research also reveals additional key drivers for the buy and sellside in terms of their needs and requirements when it comes to electronic trading and e-commerce. With SDPs, the sellside is most concerned with execution, though opportunities for competition in this area are limited. In comparison, the buyside is also looking for value added services in pre- and post-trade services. The report identifies that the divergence between these views is an opportunity for the development of competitive features within SDPs, indicative of how offerings will develop and evolve.

At the heart of the research, GreySpark has shown that a shift to a unified, client-centric e-commerce approach is likely to be popular among all market participants. The research illustrates that in three years, 39% of organisations will run a centralised e-commerce function, compared to less than 12% today. This will be supported by the deployment of a multi-asset, multifunction e-commerce infrastructure (61% in three years compared with 28% now). GreySpark maintains that e-Commerce solutions are essential for penetrating new market segments, whether geographical, client types or product types.

Frederic Ponzo, Managing Partner, GreySpark Partners, commented, “What is staggering about these findings is the growing attention and interest in electronic trading and e-commerce. Electronic trading volumes have clearly doubled over the past 10 years, meaning we’ve seen an improved business case for investment, while narrowing spreads, aggressive spread reduction and the drive for increased transparency continue to fuel a search for further efficiencies. As participation in this sector increases, particularly on the sellside, we are seeing firms defending their stake in the modern marketplace, placing ‘e’ at the core of their overall business strategy. We hope that this research can give all participants clarity in how to sustain profitability and find new opportunities in what are challenging market conditions“.

The research is a culmination of surveys and interviews with over 90 key industry participants earlier this quarter. This is the second time that GreySpark has produced such a report specifically reviewing electronic trading and e-commerce. Over this past year, GreySpark has advised on e-commerce strategy in several tier one and two banks.

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