BOSTON–(BUSINESS WIRE)–Dec. 9, 2003–The Tabb Group
— Identifies Key Business Trends and Their Technology
Implications in Shaping Financial Markets over Next Five Years
— Pinpoints Seven Technologies Driving the Next Generation
Virtual Trading Floor
— Discusses Under-Utilized CRM Technology and “The Changing
Customer”
The Tabb Group in its new industry report, “Trading on the Future: a Brief Look at the Future of Financial Markets Technology,” believes that Yogi Berra had it right when he said, “The future ain’t what it used to be.”
According to the report, “Looking into the future four years ago summoned visions of a limitless, bountiful frontier, filled with innovation, inspiration and funding for all. But with the bursting of the Internet bubble, September 11th, a recession and a police action and a war later, well, the future ain’t what it used to be!”
“The securities industry is going through a major transition,” says Larry Tabb, founder and CEO of The Tabb Group. “As the traditional broker/dealer value proposition shifts, profitable businesses that have served the industry well for decades have been profit-challenged. This shift will force firms to radically change their technology infrastructure to streamline their trading desks, extend their trading infrastructure out to their clients, outsource their back office and reduce their cost structure not only to remain competitive, but remain in business.”
The value proposition shift will impact buy side and sell side firms and their service and technology providers, explains Tabb, who believes that virtually all internal and external technologies need to change as regulatory, compliance, trading, market data, customer relationship management and risk management applications and underlying connectivity needs to evolve. Technology infrastructure, according to the report, will also need to adapt to both new economics and a new reality.
The Tabb Group, a financial markets technology strategy and planning consultancy, was founded in June 2003 by Tabb, a financial markets veteran and former vice president, securities and investments, at TowerGroup.
“The securities business in five to seven years will be much more highly automated,” says Tabb. “Trading desks will operate with fewer traders and sales people working more efficiently but in a much more critical capacity.” According to Tabb, the wave of automation and standardization that has swept over equities trading in the past five years, increasing volumes and reducing spreads, will hit the exchange-traded derivative, FX and fixed income markets over the next five years, leading to radical changes, higher volumes, lower spreads and a flight to fee-based services.
Topics covered in the report include:
— Regulation: “The largest and most profound industry changes
over the next years will come not from any new product or
service, not from development of the financial services
supermarket, not from creative Wall Street minds, but from
legislators and regulators in Washington, D.C. and (New
York’s) City Hall.”
— The Exchange: “The very members of the exchange will be the
ones that hammer nails into its coffin as they begin to route
orders to less expensive and more opportunistic trading
venues.”
— Trading: “The underlying technology that enables
fragmentation, electronic trading and the virtual exchange is
connectivity (the FIX protocol). While homogenizing firms’
services, connectivity is also forcing them to differentiate
and provide value-added services.”
— The Changing Customer: “Gone are the old days when firms
traded out of inventory. Firms are committing less capital and
shifted their business model to be less risk averse, more
fee-driven.”
— Technology Management: “The Tabb Group sees the beginning of a
rebirth in capital spending for strategic business process and
technology projects going into 2004. While this increase won’t
be the 20% we saw in the late 1990s, it is certainly better
than the past three years’ 10 to 15 per cent declines.”
— Enabling Technologies: “The Tabb Group believes that even
though they may not now be ready for prime time, they will be
ready soon and when they are, watch out as they will alter the
way the industry operates.”
The report discusses the impact of fragmentation and decimalization, how algorithmic trading and black box modeling tax the industry’s infrastructure, viewing the trading organization as a “factory”, the impending shakeout and its impact on the hedge fund sector within three years, the new future for customer relationships and how essential CRM technology has been underutilized. It also focuses on technology, where “the only constant is change”, the role of technology management and STP, the accelerated velocity of market data and how speed of execution is wreaking havoc on risk managers.
Adds Tabb, “While technology for technology’s sake has a certain allure, technology is and will continue to be run more like a business than a personal playground for the deep-pocketed.”
A copy of the report is available at www.tabbgroup.com/research.
About The Tabb Group
The Tabb Group is a financial markets technology strategy and planning consultancy focused on helping financial services firms, vendors and technology integrators better understand, create, align and execute their business technology visions. Based in Westborough, Massachusetts, The Tabb Group was founded in June 2003 by Larry Tabb, a 23-year financial markets veteran and the former vice president, securities and investments, at TowerGroup, the Massachusetts-based analyst firm and division of Reuters Group (NASDAQ: RSTRY), where he managed research across the capital markets, investment management, retail brokerage and wealth management segments. For more information, visit www.tabbgroup.com.
