Exchanges 2.0: The Evolution of Exchange Technology in Cash Markets
Technology is no longer solely an enabler, but rather a core function of leading exchanges. Celent believes that, through 2015, more and more technology infrastructure will be considered strategic for exchange operators.
In a new report, Exchanges 2.0: The Evolution of Exchange Technology in Cash Markets, Celent examines the new platforms and advanced technology services offered by leading exchange groups. The report also discusses what exchange operators should do to optimize the return on their trading infrastructure.
Exchange groups have become some of the largest financial technology distributors in the world, with several exchange groups creating separate divisions to commercialize their trading infrastructure. Moreover, exchanges are expanding to support a wider operational footprint, driving continued IT development and investment across the trade process value chain.
Technology is a big business. At the largest exchange operators, 2011 revenues from IT were US$1.8 billion, or 20% of major US and European exchange groups’ revenue. Furthermore, these revenues are projected by Celent to grow at a 20% CAGR from both organic and inorganic sources to reach US$3.8 billion or 33% of exchange revenues by 2015.
“For exchange operators, what will ultimately separate the winners from losers is being able to build and leverage technology to appeal to high frequency trading institutions, while balancing the needs of other market participants,” says David Easthope, Research Director with Celent’s Capital Markets Group and coauthor of the report.
“To win this business, exchanges must continue to evolve their trading platforms and offer advanced technology services,” adds Muralidhar Dasar, Celent Analyst and coauthor of the report.
Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].
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Table of Contents
The Appeal of Targeting HFT Institutions
Why This Customer Segment Is Important
Meeting the Needs of HFT Institutions
The End Goal
The Maturation of Exchange Technology in Cash Markets
Commoditization Leads to Commercialization
Growth of IT as a Share of Revenues
Exchanges Adopt Evolutionary New Structures and Platforms
Competition Forces Change
New Structures: The Case for Cross-Border Mergers
New Platforms: The Case for Multiasset and Multigeography
Exchanges Build Global Platforms
Collaboration Among Exchange Operators
Exchanges Offer Advanced Technology Services
Advanced Technology Services Are Critical
Expansion of Exchanges Across the Trading Infrastructure Value Chain
The Rise of Data Center Communities
Reducing TCO Through Cloud Services
Risk Management Emerging as a Key Opportunity Area
IT Becomes Strategic: Recommendations for Exchange Operators
Recommendations for Exchange Operators
Opportunities for Capital Markets IT Players
Leveraging Celent’s Expertise
Support for Financial Institutions
Support for Vendors
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