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November 21, 2012

Ovum: Additional IT Investments Likely in Financial Markets During 2013



The still-challenging global economy and increased level of U.S. regulations will likely lead to additional IT investments by financial markets during next year, according to a new study.

Research firm Ovum (News - Alert) said the markets will need to comply with the regulations, which in turn will increase some technology spending in 2013. An example of the regulations that Ovum is discussing is the controversial Dodd-Frank Act in the United States. The law affects various industries, including the energy sector, TMCnet said.

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The sectors that will increase in importance include risk analytics for credit, market, operational and liquidity risk, the study said.

“Market participants are in a search for more risk-averse business strategies and easier regulatory compliance,” according to FTSE Global Markets.

Also, businesses will need “in-memory” technology for large amounts of data at high speeds associated with risk management and reporting, the study adds. Client services will be important, too, and businesses will need to provide information on how portfolios are going. The information will be offered to mobile devices, and to other formats.

There will also be more use of the cloud, increased automation and additional focus on post-trade operations, Ovum said. There will be more use of the front office, too, rather than having brokers take up additional tasks.

“With 2013 comes a lot of challenges for the financial markets, with both the buy and sell sides of the industry turning to greater use of technology as the solution,” Rik Turner, a senior analyst at Ovum, said in a statement from the firm. "The buy side is looking to lower its dependence on brokers with heavy investment into front-end services as it looks to retain a much less faithful client base, whilst the sell side looks to underscore its complex multi-asset strategies with greater product accounting."

“This combination of a depressed world economy; the volatility caused by the uncertainty of recovery, particularly in Europe; and tougher regulation starting to bite – leads companies in the financial markets to adopt more cautious, risk-averse business strategies,” Ovum said in the 2013 Trends to Watch study. “The sell side is prioritizing improvement in the bottom line over growth in the top, focusing on product accounting for more complex, multi-asset strategies in an attempt to compensate for the lack of margin in cash equities. Meanwhile the buy side, aware that investors are becoming less faithful as they seek better returns, is investing to shore up assets under management with improved client servicing, providing an overall better customer experience in the hope of keeping their business.”

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