More than three-quarters of financial institutions have yet to allocate any budget to implement the changes required by the European Union's impending Markets in Financial Instruments Directive (MiFID).
However, most understand the impact of the legislation on their business.
The findings, based on research by US trading software house Gissing, come ahead of the expected release of MiFID's final wording by Christmas.
The MiFID IT Joint Working Group has advised IT directors to urgently confront the challenges of the legislation, given the likely complexity of the implementation and the tight timescale for making any changes.
Last week industry regulator the Financial Services Authority issued a warning to financial services firms to start making preparations for MiFID.
The directive is slated to come into force on 1 November 2007. A consultation paper is also due out from the regulator in March 2006.