Budget increases for trading desks drove buy-side technology spending above $10 billion last year, according to a new report – Buy-Side Technology Spending Continues Upward – from Coalition Greenwich.
Its research showed that the average buy-side trading desk budget increased approximately 5% last year, to $2 million annually.
The consultancy found that technology accounts for about a third of that spending, with compensation comprising the remainder.
The report said the trend is fuelling fierce competition amongst an expanding host of innovative institutional fintech providers.
“Fintech providers are offering buy-side firms cutting-edge tools to improve the research process, risk management and cybersecurity capabilities, to name a few,” says Brad Tingley, research manager at Coalition Greenwich market structure & technology and author of the report.
He adds, “To remain competitive, trading desks must make sure they are taking advantage of all the opportunities technology provides.
“This is not to say that technology will be replacing human traders. Success today requires having the right people in the right roles—with the right technology at their disposal.”
Fixed income trading desks drove much of last year’s technology spending with a 12% year-to-year hike.
In the study, fixed-income trading desks spanned both rates and credit markets. Breaking it down further, in total, 56% traded U.S. corporate bonds, 44% U.S. Treasuries, and 44% interest-rate derivatives.
As for equity trading desks, budgets increased 4% with market data terminals taking the biggest chunk, accounting for 30%.
The study also found equities trading desks spent significantly on order management systems (OMSs) (24%), market data feeds (13%) and risk and portfolio analytics (7%).
For equities, the respondents are primarily responsible for cash equity trading, although just under 50% also trade equity derivatives.
Foreign exchange was the only asset class that saw a drop in budget of 2%.
