Cross-Asset Algorithmic Trading Goes Mainstream, While Software As a Service Gains Traction

Q: What will be the event/trend that will define financial services in 2007?

A: David Dart, Former CIO: There will be an emergence of cross-asset algorithmic trading. Rather than just a niche play, it will really come into the mainstream. A lot of firms will leverage that technology. It is a big thrust for the business, and the technology itself is coming into the mainstream.

Also, the launch of Vista. The hype will not match expectations. I wonder if we have seen the peak of Microsoft products on the desktop. I think people will be underwhelmed by Vista, and the monopoly that Microsoft has had on the desktop may begin to change.

Q: Is there any functionality in Vista that will make a difference for a financial firm?

A: I don't believe so. Microsoft has tightened up some of the security issues and there is some more functionality in there. But other than that, I'm not sure.

Q: Are there any specific players that will drive cross-asset algorithmic trading? Will buy-side firms begin to do this themselves?

A: Clearly, it is in the expertise of the sell side, but you will see a lot more of it from the buy side. It is becoming a mature business model, and it is going to be picked up by a lot of organizations. In terms of specific players, there are a number of firms. But I don't think one or two are going to dominate.

Q: How will Web 2.0 change financial services in 2007?

A: Web 2.0? What exactly is it? ... Everyone has their own take on it. My sense is that it is a great marketing term. I see it as the gradual evolution of the old-style Internet usage. Clearly, there is the talk about the Web technology being the platform, and that is a great concept. But rather than seeing a big bang and loads of Web 2.0 applications, you will see a gradual evolution into Web 2.0. But I'm not sure if Web 2.0 is going to solve a lot of problems in financial services. Maybe on the retail side you will be able to give customers more command of their data. But other than that, I don't know if it will have a large impact.

Q: What is most in demand (when it comes to IT) in the industry at this time?

A: In terms of skill sets, Web services is in high demand. By and large, there are still a lot of integration issues inside organizations, and information still doesn't flow efficiently. There is always a need for concise and consolidated data, especially in the larger banks. In many cases, they are still operating as independent silos.

And people that have actual experience with virtualization will be in demand. Virtualization has been a big buzzword, but not many people have actual experience with it.

Q: What emerging technologies or business strategies will have the potential to change the industry in 2007?

A: Again, a lot of algorithmic trading will be evident in 2007. Now, algorithmic trading has become popular during a growth market. Will it still be en vogue in a declining market? Also, we see an emergence of consumer electronics that impact the business. For instance, wireless networking was once considered a consumer technology; now it is being embraced by the business.

Also, software as a service will be important in 2007. It never really took off before, but the technology has matured and people are more comfortable with the concept. It will be an important option for smaller firms, such as hedge funds, that do not want to build a large back office. Instead, they will subscribe to a service that has the expertise.

10 Critical Business Technology Issues for The Street In 2007, firms will face the daunting full rollout of Reg NMS in the U.S. and the likely beginning of MiFID implementation in Europe while they continue to struggle with data privacy, OTC derivatives, a shortage of talent and the potential of Web 2.0, among other challenges. more...