Derivatives Trading Technology: Structural Complexity Driving Next-Generation Demands

Derivatives traders thrive in fast-paced markets in which flexibility, speed and global access are prerequisites for success. The need for powerful analytics is a given, as is the need for the flexibility to change strategies on the fly. And as the universe of market participants using derivatives continues to expand, traders are increasingly looking for new tools to manage their growing needs. Making sense of the rapidly evolving market structure and mosaic of new products has become a daily challenge, especially as the tools traders typically have at hand are quickly becoming obsolete.

The global derivatives industry remains in transition and the technology that supports the trading is in the forefront. TABB Group surveyed 72 buy-side, sell-side and proprietary trading firms active in the global derivatives markets to solicit opinions on trends impacting their technology investment decisions. The results of the survey provide interesting perspective on factors that drive the decision process around choosing a new derivatives trading platform, as well as insights into whether a firm should build, buy, or deploy a hybrid approach when deciding on a new platforms and deployment of their scarce technology resources.

Adapting to regulatory and market structure shifts in near real-time has become a growing priority. Waiting in line for a system enhancement from internal IT or third-party vendors is no longer tenable. Trading firms are demanding flexible architectures that can be quickly modified to support the needs of each and every trading desk within the firm. It is no longer sufficient to be best in class for a single asset class or marketplace. The most successful trading firms will take control of their own destinies, choosing trading platforms that allow them to buy the basics and build for the markets of today and tomorrow.

This TABB Group report examines the factors and challenges facing the financial industry as they seek to design and deploy trading technology to support their trading strategies in the rapidly evolving global derivatives markets.