Despite the global reinvention of securities exchanges as for-profit companies, IT spending by exchanges will continue to lag behind that of brokers and asset managers, according to research from TowerGroup. The Needham, Mass.-based research and advisory firm affirms that the global exchange market is on the cusp of a new era, but asserts that exchange collaboration, cross-border links, demutualization, and mergers and acquisitions will keep IT spending in check.
Global IT spending for exchanges will increase at a compound annual growth rate of 3 percent through 2009, according to TowerGroup. By comparison, brokers are expected to see 6 percent to 7 percent growth in IT spending, and asset managers can look forward to 7 percent to 8 percent growth.
While exchanges will invest in technology, new investments will be offset by other factors, TowerGroup says. Consolidation of the exchange market in the U.S. and cross-border deals will allow exchanges to reduce IT costs, the report asserts, and demutualization will drive down spending as firms look to improve cost efficiency to sustain their high valuations. Further, new expenditures related to Reg NMS and MiFID will be overcome by ongoing IT cost reductions related to infrastructure rationalization, TowerGroup adds.