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March 7, 2008

Sellside to Bulk Up Stressed Trading Infrastructure

By James Ramage

The sellside wants to bolster its overtaxed trading architecture. And they're going to spend a lot to do it over the coming years, according to a recent Aite Group report.

Trading architecture has struggled to keep up with the explosion in electronic messaging. In response, U.S. firms will spend an estimated $164 million for high-performance messaging middleware this year to rectify this and get a competitive advantage, the report says.

That figure will climb to $190 million in 2009 and $220 million in 2010. Likewise, firms will spend an estimated $547 million on algorithmic trading infrastructure this year, $916 million in 2009 and $1.3 billion in 2010.

Finally, the sellside will spend an estimated $2.54 billion in global market data infrastructure this year, $2.82 billion in 2009 and $3.24 billion in 2010.

Balancing specific trading desk demands with those of the firms' respective IT departments remains a challenge for brokerages, the report notes. "Most firms agree that on the equity-trading side, the existing order and execution management infrastructure is flawed and requires a significant change in philosophy to solve the current data and trading growth," the report says. And most firms are looking to build on, around or alongside their existing infrastructure rather than replace it altogether.

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