Trends in Asset Management Trading Technology

September 20, 2006

Abstract

New York, NY, USA September 20, 2006

Trends in Asset Management Trading Technology

Asset managers and hedge funds grapple with the new and improved trading environment.

What a journey it has been in front office trading over the last five years庸rom automated work flow routines to sophisticated algorithmic trading, from locomotive to bullet train speed, from phone-savvy traders to electronic trader gurus. The latest evolution of execution management systems is reconfiguring traders' desktops, packing in more tools and options. More choices, with vendor introductions from overseas and new product launches, are still afoot. The upside for the asset manager is tremendous since the degree of autonomy is significant and long-awaited. The downside is multiple systems, a change in required skills on the desk, and a rapidly changing environment in market structures and regulation.

Technology and trading divisions of firms are posing questions around near-term and future needs. In a new report, Trends in Asset Management Trading Technology, Celent looks at some of these questions, which include: Do we still need multiple trading systems, or can we consolidate? Do we need an OMS or an EMS, or both? Has our trading vendor kept up with functionality upgrades? Are there newer systems on the market that better align with our anticipated use of multiple asset classes and our organizational structure? Are our vendor contracts in line with prevailing market prices?

However, even with all this change, global spending will grow at a slower pace over the next few years. Prices have declined, and there is some market saturation. A compliment to the wide variety of systems and price points available, vendor consolidation, will likely continue as well as client consolidation. Total global spending by asset managers on trading systems will grow from US$634 million in 2006 to US$757 million by 2010, an average annual growth rate of 4.6%

"Progressive technology vendors will garner greater market share as investment firms seek to streamline costs, work with fewer vendors, and capitalize on functionality upgrades. In the US, firms will look to benefit from vendor consolidations and new product launches with an eye toward streamlining the trading desk." says Denise Valentine, senior Securities & Investments analyst and author of the report. "In Europe and Asia, life on the desk is somewhat more simplified with centralized liquidity venues, larger orders, but less automation overall. Nonetheless, the algorithmic programs, direct market access, and analytics tools are no less valuable, and interest is rising. The next wave of infrastructure change relative to trading technology will occur in these markets."

This report discusses trends in trading technology as well as the typical investment management front office technology framework. Numerous vendors are cited to orient the reader to the popular providers and their orientation.

The 36-page report contains five figures and seven tables. A table of contents is available online.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary 3
Introduction 5
Market Trends 7
Trading Technology Framework 12
  Order Management System 16
  Decision Support: Portfolio Modeling 17
  Trade Compliance 18
  Trade Blotter 19
  Expanding List of Modules 20
  Execution Management System 22
  Transaction Cost Analysis 24
  Connectivity 26
  Sell Side as Innovation Leaders 28
Market Sizing for Trading Systems 31
Conclusion 33
Objectivity and Methodology 34
 

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