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For Front Office, More of the Same Means More $$$$

January 1, 2007
By Alexa Jaworski

Peter Skoglund, director of product development and systems engineering at BT Trading Systems, an IPC rival in the turret business and a unit of London-based telecom giant BT Group, said customer priorities are more and more focused on trader effectiveness. He expects clients to spend more money on technology integration and VoIP.

"The sales cycle seems to have grown, particularly the purchase cycle for trader voice," Skoglund said. "There's complexity around voice over IP and what that means to the IT department. The customers are looking at their infrastructure, asking themselves how they will support IP, and is IP the right thing for them. That's one thing that is definitely on their mind and will continue to be on their mind in 2007."

Adjusting for Scale

Gerard Rafie, VP of San Francisco-based software house Calypso Technology, said that some hedge funds will continue to require systems that can support their sophisticated trading activity, delivered in a smaller package than the systems traditionally used by the banks. "We have worked with Sky Road to develop an offering that meets their requirements, and we expect to see continued uptake of this in 2007," he said, referring to his company's partnership with Sky Road, a Downers Grove, Ill. trading infrastructure company.

Additionally, Rafie continued, larger asset management companies find that the sizable derivatives positions on their books require more investment in support systems. "Traditional buy-side solutions have not been developed for derivatives trading, so these asset management companies are turning to solutions like Calypso to handle their requirements, particularly for derivatives processing," he said.

At the retail level, Adnane Charchour, CEO of Jersey City, N.J.-based Scivantage, a provider of Web-based front- and middle-office brokerage systems, said he anticipates about a 30 percent increase in industry spending from 2006. "The hot topic right now and in the immediate future is security and identity theft in the e-brokerage space, in addition to risk management," he said. "Another one is continued customer service improvement-how to improve communication between financial advisers and their customers."

David Chapman, CTO of New York-based consulting firm Finetix, said there will be continued interest in cross-product platforms and in mobile or "on the road" technological offerings. "In 2007, we're definitely seeing an increase in IT spending in that we see technology as a business-driving force, especially in terms of automated trading," he said.

Peter Sibirzeff, managing director of Stockholm-based trading technology company Orc Software's U.S. division, pointed out that U.S. market structures are undergoing rapid changes with, for example, the arrival of penny price quotes in options, which will require major system development and capacity upgrades. "We are working hard at providing good solutions," he said. "I don't think there's any market in the world that has as much strain as the U.S. equity options market."

Sibirzeff added that with multi-asset-class trading becoming the norm, exchanges are broadening their mandates-as the International Securities Exchange did with the ISE Stock Exchange, which introduced its full-fledged displayed market this month. "This also puts additional strain on the users that want to reach these liquidity pools and who now have to connect to more markets," the Orc executive noted.