Escalating regulatory enforcement will cause compliance technology spending to grow 35% from 2012 to 2015, Aite Group has predicted in its report, "The Trade Surveillance Compliance Market and the Battle for Automation."
“We estimate vendor IT spending on market surveillance and trade compliance technology to be $300 million in 2012,” comments Danielle Tierney, analyst in institutional securities and investments at Aite Group. “We estimate that it will reach over $400 million by the end for 2015.”
Compliance technology that is flexible enough to handle high frequency trading is in need due to many of the regulations focused on dealing with HFT in the marketplace.
“The growth is due to the need for increased features, functionality and flexibility,” says Tierney, such as "the ability to handle larger and less structured amounts and types ... of data.”
[Check out: Ten Things Compliance Officers Need to Do In 2013 to learn more.]
Other growing demands are for vendors to include solutions that handle front to back office data, as well as mobile functionality and communication channel coverage.
Competitive features incorporate analysis of news, external events, and social media. Support and automation for multiregion and cross asset class analysis is also in demand.
Other qualities that firms require include the ability to detect patterns, set automated alerts based on risk, manage data mining for unknown risks, easily configurable tools, review historical data and attach relevant documents to alerts, according to Aite Group.
Brokers are currently spending the most on compliance technology, comments Tireney. Institutional brokers, retail brokers and buy-side firms make up the biggest spenders on compliance technology, collectively. However, opportunity for spending in advanced compliance technology in emerging-markets is down due to the lack of regulatory enforcement in those markets.
The report is based on research which took four months to complete and included survey responses, as well as interviews, with compliance vendors and end users.
Aite Group, headquartered in Boston, is an independent research and consulting firm. Founded in 2005, the firm focuses on the impact of business, technology and compliance on the financial services industry.