To buy or not to buy — that is the question in financial technology. Or at least it has been for a very long time. The arguments for building in-house have remained constant and include the need for performance and the quest for differentiation (such as customized trading strategies). At the same time, time-to-market, complexity and – most obviously – cost, were key arguments for buying. But what if there was a third approach: buy and build?
All of the arguments for build and buy respectively still have merit, but we believe that their respective weights have shifted over time, effectively making in-house development an even more exclusive option. The most significant driver behind this shift is the advance of technology and a more flexible approach to trading system design.
High-speed trading connectivity has been a major advantage for the past several years. But as low-latency infrastructures become a mainstream capability, the cost of generating incremental speed has become prohibitive, and market participants are seeking new ways to differentiate their activities.
Firms are seeking to add value to their trading systems, while maintaining the high-speed connectivity they need to remain competitive. To accommodate new capabilities – in the form of pre-trade analytics, risk controls and post-trade clearing intelligence – trading firms across the board are re-evaluating their systems.
A higher level of trading system flexibility based on modern system architecture and the use more open technologies, means that smaller players can start to add unique functionality where before they were constrained by resource to use of vanilla third-party systems with little scope for differentiation.
A modern trading system such as Tbricks by Itiviti allows clients to choose freely from a library of business logic (we call this apps) for a completely customized experience. Combined with access to the source code and the tools required to make changes, we believe that the gap between buying and building is significantly reduced. Indeed, we believe that the classic buy vs. build now includes a highly competitive third option: a combination of the two.
In Itiviti’s whitepaper “Buy and build: A Blueprint for a Modern, Agile Trading System”, we explore approaches for creating a trading platform that is flexible enough to satisfy the changing needs of traders, powerful enough to deliver the analytics that provide better informed trading decisions and fast enough to satisfy client needs for performance and regulator expectations of trade visibility close to real time.
Execution Participants of the GlobalTrading roundtable “Future-proofing trade execution systems” discuss their key takeaways from the event, including the challenges posed by current and future regulation, the buy vs. build dichotomy, the need to maximize the impact of technology, the challenges and opportunities posed by technology and current trends around system consolidation. Interviewees include: – James […] March 20, 2018
Execution Regulation, technological advances and behavioral changes mean that trade automation will increase, which will in turn force systems and their providers to become more agile, agree speakers at a GlobalTrading roundtable. The degree to which firms should standardize and the merits of outsourcing, however, remain controversial topics. This video and article sum up the key […] March 15, 2018
Execution Lars Wiberg, VP Strategic Research Trading and Trade Execution, discusses pre- and post-MiFID II trends in the OMS-EMS arena, covering a number of issues including consolidation, optimization, cost savings, workflow, globalization and outsourcing. March 7, 2018
Execution This is the second part in a series that explores the past, present and future of Order Management Systems (OMS) and the closely related Execution Management Systems (EMS). We cover these trading tools mainly from a sell-side perspective. As financial markets change, new demands on trading technology appear. This includes the functional requirements of the […] February 27, 2018