Evolution in Exchange Technology: The Arms Race Continues (Strategic Focus)

Evolution in Exchange Technology: The Arms Race Continues (Strategic Focus) published by Datamonitor in October, 2009. This report consists of 32 pages and the price starts from US $ 3395.

Introduction

Abstract

Introduction

The market for exchange services has become increasingly competitive in Europe, while the US has already seen consolidation. This report considers the drivers for lower latency and guaranteed throughput for access to matching engines, while at the same time surveying the landscape and assessing the potential for US-style consolidation in Europe.

Scope of this research

• Exchange technology
• The business side of exchanges; M&A activity, etc..

Research and analysis highlights

The backdrop to the evolution in exchange technology is a proliferation of trading venues, resulting in a fragmentation of liquidity across them, to which a growing number of buy- and sell-side firms respond with the adoption of high-frequency trading (HFT) strategies underpinned by algorithmic servers.

Key reasons to purchase this research

• Gain an insight into how the exchange sector is evolving annd the role technology is playing in the process.
• See where the opportunities for independent tech vendors are in this sector.

Table of Contents

OVERVIEW

• Catalyst
• Summary

KEY MESSAGES

• More competition among trading venues is on the way
• Investment in exchange technology continues apace
• Trading venues have become technology vendors too
• Latency and throughput drive matching engine development
• Market surveillance has to keep up with faster matching engines and greater order volumes
• Clearing relies on risk management; settlement is about managing multiple accounts
• Opportunities for technology vendors differ from small to large venues

MARKET OPPORTUNITY

• More competition among trading venues is on the way
• Investment in exchange technology continues apace
• Trading venues have become technology vendors too

TECHNOLOGY EVOLUTION

• The driver in exchange technology is to do more in less time
  • The drivers for matching engines are latency and throughput/scalability
  • Market surveillance systems need to keep up with the matching engines, multiple assets and venues
  • Clearing and settlement require good risk analysis and records management
• Opportunities for technology vendors differ from small to large venues
• There are also opportunities to sell surveillance technology to regulators

CUSTOMER IMPACT

• Latency and throughput drive matching engine development
• Hardware acceleration has not made it into matching engines
• Market surveillance has to keep up with faster matching engines and greater order volumes
• Clearing relies on risk management; settlement is about managing multiple accounts

COMPETITIVE LANDSCAPE

• Trading venues which develop and sell their own technology
  • NYSE Euronext
  • NASDAQ OMX
  • Deutsche Borse Group
  • London Stock Exchange
  • Financial Technologies (India)
  • Chi-X Global
• ISVs offering exchange technologies
  • Cinnober
  • Patsystems
  • Smarts Group
  • Progress Software
  • List Group
  • Fidessa
  • Quod Financial
  • IBM
• IT service companies
  • HP
  • Accenture

GO TO MARKET

• Recommendations
  • Determine which type of trading venue you want to target
  • Depending on the geography you target, you may need to put in local support staff
  • Smaller vendors may need to partner with a credible SI to win larger deals

APPENDIX

• Definitions
  • Central counterparty (CCP)
  • Central securities depository
  • Dark pools
  • MiFID
  • RegNMS
  • Code of Conduct for Clearing and Settlement
  • Smart order router
  • Alternative trading system (ATS)
  • Electronic communication network (ECN)
  • Multilateral Trading Facility (MTF)
• Methodology
• Further reading
• Ask the analyst
• Datamonitor consulting
• Disclaimer

TABLES

• Table: Latency and throughput rates

FIGURES

• Figure: How data flows in a trading environment
• Figure: Market structure for clearing and settlement in the US and Europe

Related Reports