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TowerGroup Says Markets Will Increasingly Be Differentiated by Technology

Four forces -- technology, regulation, competition and revenue generation -- are combining to create "next-generation capital markets" in the United States and Europe, in which technology will be among the key differentiators, new research by TowerGroup concludes. "Some of these four are exchange-driven, such as growth by Eurex, the London Stock Exchange or Nasdaq. Some are enabled by regulation," said Robert Iati, director of the Securities & Capital Markets practice at TowerGroup, in a statement. "And some arise from competition external to the exchanges, such as from software vendors or from activities now being executed in-house by broker-dealers."

Iati noted that apart from pockets of activity such as new debt from an expanded Europe, the markets aren't growing fast enough to deliver revenue growth to all the players, so they're aggressively encroaching upon each others' turf. Among the report's findings are that the way markets use technology internally and in the delivery of products will increasingly drive markets' ability to be profitable. It also predicts broker-dealers will sharply increase acquisitions of technology products.

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