Managed Trading Services On the Rise
Global spending on managed trade services is estimated to reach $620m by the end of 2015, up from $500m last year due to regulatory changes and capital constraints on banks.
A study commissioned by Interactive Data and produced by consultancy Aite Groupe estimated that an average tier I bank spends nearly $100m to maintain trading infrastructure, including market data.
The report said: “Even if a small percentage of these larger firms opt to outsource some of their trading infrastructure components, the global managed trading services market can experience a significant increase in market revenue over the next three years.”
Rob Lane, general manager real-time feeds and 7ticks EMEA for trading solutions at Interactive Data, told Markets Media: “Banks are under huge pressure to reduce costs and many have realised they all use the same infrastructure. They can outsource that and spend on their areas of expertise such as algos they have developed using their own intellectual property.”
Outsourced infrastructure can include execution management systems, order management systems, certain types of market data and database storage.
Another driver of outsourcing is the increase in electronic trading across asset classes and regions as regulators encourage products to move from the over-the-counter market to exchanges.
Lane said: “Electronic trading in fixed income is some way off but interest rate swaps are swinging into play and we are helping Icap in foreign exchange.”
In February Interactive Data announced it was providing services to trueEX, the first interest rate swaps exchange approved by the Commodity Futures Trading Commission as a designated contract market.
The U.S. has been ahead of other regions in outsourcing infrastructure according to Lane. “There is demand for derivatives and equities infrastructure in Europe,” he added. “There is a lot of opportunity in Asia but the region is so complex that will be a long haul.”