Connectivity Delays Cost Trading Desks $5m

Terry Flanagan

Investment banks may be losing as much as $5m in trading revenues per desk each year due to delays in connecting to new markets, according to a survey commissioned by Colt, a network provider.

In a survey Colt, which provides network, voice, data centre and managed cloud services, found 49% of buyside and sellside traders in Europe, US and Asia believe that delays in connecting to new markets result in missed trading opportunities, and 47% believe that it impacts client relationships and causes loss of clients.

The survey said: “Resulting losses at investment banks can be as high as $5m in trading revenues per trading desk each year.”

More than a quarter of respondents said that it took them over a month to connect to a new client, with one in ten saying it took over two months.

“While 41% of all respondents can access new liquidity sources within a week of the business decision being made, more than half of respondents (59%) think that their desk should be able to access new markets more quickly and approximately one third (34%) think that delays adversely affect revenues,” added the study. “Nearly one third (32%) said they experienced technology failures at least once a fortnight.”

John Loveland, VP Capital Markets, at Colt told Markets Media that connecting to new markets can be slow because incumbents have been in the market a long time and use old technology while Colt owns its own infrastructure.

“We are trying to be more disruptive and introduce new processes,” he added. “After our first installation, firms can connect to a second market within a week.”

The study was conducted in March 2015 and surveyed 289 heads of trading, heads of desk, portfolio managers and hedge fund managers in Europe, US and Asia.

This month Colt announced the launch of its financial services extranet Colt PrizmNet, which will connect providers of financial content, including market data and research, to capital markets firms. Providers who have agreed to distribute content include NLX, Nasdaq, Japan Exchange Group and Aquis Exchange. Loveland said Colt currently in discussions with more than 50 providers of content for Prizmnet.

The extranet is available across Europe and is also slated to launch in Asia and key North American cities such as New York, Chicago and Toronto, this year.

Ryusuke Yokoyama, executive officer at Tokyo Stock Exchange, said in a statement: “The increasing interest in the Asian markets has created a growing demand for access to JPX products. With the broad reach of the network, the fast connections to major markets and the ability to monitor those connections in real time, JPX welcomes the launch of Colt PrizmNet to help market participants in Asia, Europe and the US quickly and easily access the services we provide.”

Related articles

  1. Bar Raised on FX Trading

    Upgrades enable hedge funds and asset managers to gain actionable insights quicker and more efficiently.

  2. They will help investors identify companies committed to improving gender diversity.

  3. Investors are seeking the tax efficiency, trading flexibility and cost benefits of ETFs.

  4. Low Bond Yields Force Pensions’ Hand

    US Department of Labor has allowed pension plan fiduciaries to consider ESG factors.

  5. Goldman Sachs Asset Management agreed to pay a $4m penalty.