Trading firms say their number one challenge is the cost of
updating their IT infrastructures following deregulation of trading
markets, research by
think-tank JWG reveals.
The
Markets in Financial Instruments Directive (Mifid) which came
into force in November has put pressure on traders to link their IT
systems to a host of new share trading venues and share information
providers.
Trading firms' IT systems are coming under strain from rising
share trading volumes, with order levels set to skyrocket 1600%
from today's levels to 191 million orders a day, said the
report.
"Current infrastructures are continuing to take on more and more
data with increased trading and costs are continuing to rise," said
PJ Di Giammarino, CEO at JWG-IT.
Trading firms need robust IT systems to deal with peaks in
trading. Companies that provide market data, such as
Thomson-Reuters and Boat, are the first to face IT difficulties
when trading volumes rise, Di Giammarino said.
The high volume of share trading carried out in the City last
week, when companies started buying again after a period of
caution, caused problems for some stockbrokers.
"Trading systems across the city experienced issues," said one
Stockbroker.
Share trading reached "unprecedented levels for the time of the
year," he said. "August and September are normally dead," he
added.
Effects of Mifid
Mifid has increased competition between stock exchanges and
choice for traders about where to trade, through the removal of the
Concentration Rule. This means local trades no longer have to
go through local exchanges and has led to the creation of new
venues such as Turquoise.
At the same time it has introduced rules that force trading
firms to be able to show that they have got the client the best
deal including best price possible, with the introduction of the
Best Execution regulation.
Trading firms must also commit to getting the best deal
available, which requires them to link to receive more real time
information from
different sources.