Innovation on the Horizon

Robert Iati, senior analyst at TowerGroup, has spent a lot of time thinking about what the future trading floor might look like. He has also spent a lot of time considering a world without (or at least less dependent on) legacy systems. Both of these areas - trading and infrastructure - he believes, are poised for innovation. Don't expect any major changes until around 2006, though, Iati says. "These things never happen in a big bang approach, but rather piecemeal," he notes. "If you had to focus on one area where innovation is needed, I think it is undoubtedly in the front office - trading side - due to its highly competitive nature," he says.

Iati explains that the changing market structure is resulting in a need to rethink the way Wall Street trades. He envisions a movement toward synergistic markets - bringing the changing market structures together - in effect, he explains, doing away with the siloed approach and creating synergies across products, asset classes and even geography.

"The right kind of technology can be used and applied to make this happen," he says. The market is seeing some of that now as there are more products and strategies going across asset classes - for example, listed and unlisted systems are coming together, he notes.

The second area where change is imminent is around infrastructure. Iati explains that there will be a continuing expansion of new-age technologies, including the deployment of open source, Web services, and grid and utility computing, and the appropriate infrastructure is needed to support them. Legacy systems have run their course, he remarks.

Iati's vision is that the market will see an infrastructure develop that will make it easier to take advantage of all of these new-age technologies. Right now, different firms are toe-dipping in these technologies individually. Legacy systems, however, make it difficult to take advantage of everything at once.

Iati sums it up by saying, "The infrastructure that we have today in this industry was built for yesterday."

This is not about cost savings - saving money is a by-product of these concepts, not the driver. "It's about innovation and adding value to clients," Iati says.