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Trading technology: keeping up with change

By Martin Nilsson
January 20, 2017
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The build vs. buy debate has raged for decades now. Financial technologists know they must build to get the complete customization their internal customers demand. But they must buy if they are to make ongoing maintenance of cutting edge systems both an economic and a practical reality.

Keeping up with change in the global financial markets is more important than ever. Regulatory change, business change, operating model change; all mean that banks, brokers and trading firms can’t afford to stand still when it comes to trading technology. But a number of factors are conspiring to make keeping up difficult at best, and in some cases impossible.

Staffing is a major issue. A decade on from the first inkling of the oncoming global Credit Crisis, staff continue to be trimmed as firms focus on cost concerns. At the same time, the cost of finding qualified staff is rising, not least as competition from non-financial segments – think: Google, Amazon and the like – pushes up salaries globally. The US Department of Labor, for example, estimated the median cost of a computer design specialist last year at almost $90,000. Financial services specialization adds to the cost substantially, particularly in areas such as coding for trading firms.

This lack of staffing has a direct impact on project timelines. Many internal design build projects are delayed due to lack of human resource. Ongoing maintenance of mission-critical systems and adaptation to regulatory requirements takes priority. New functionality – underpinning new business – is taking a back seat to business as usual, or rather maintenance under pressure.

In the derivatives trading space, many firms are using vendor-supplied elements to supplement their internally built systems. But increasingly – given regulatory pressure, internal inflexibility and lack of resource – banks, brokers and trading firms are turning to their vendors to provide their entire trading infrastructure.

Key to this development is a drastic change in the approach to system architecture and design, including the ability for clients to access the vendor’s source code and development tools. Financial firms now have the freedom to tailor software to match their exact needs, just when they need it. This ‘buy and build’ model allows firms to benefit from the stability and ongoing development afforded by a vendor offering, while at the same time adapting the systems to fit their specific needs.

It’s a win-win situation that addresses the challenges of today’s fast-changing derivatives marketplace, and one that’s sure to take hold as firms look to move to their next-generation trading infrastructures.

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