next generation trading · retail trading & sales c.c. & custody other institutional...
TRANSCRIPT
Next GenerationTrading
Nigel Woodward – Global Business Mgr Capital Markets and Securities
Agenda
• What is Next Generation Trading
• Market Dynamics
• SUN technology views
• Introducing STAR
• Food for thought, context for the following sessions
So – for the business – how is this yeardifferent than prior years ?
BUSINESS DRIVERS2004-2005
1. Industry scandals leading to moreregulatory scrutiny
2. Refocus on Investment Return andClient Service
3. Increasing investor sophisticationcoupled with greater demands fortransparency
4. Changing market structures5. Recognition of innovation as
differentiator6. High expectations for Operational
Resilience7. Capturing Efficiency gains to reduce
costs and risk8. Strategic IT budget management9. Rebirth of new products and services10. Industry Consolidation and
Convergence
N
N
NIncreasing Importance
Decreasing Importance Same Importance
New to Top 10
BUSINESS DRIVERS2002-2003
1. Cost Containment
2. Shift from Strategic to Tactical ITInvestment
3. Business Continuity Planning
4. Refocus on Investment Return
5. Decreased confidence in / increasedscrutiny by clients
6. T+1 is out, STP is in
7. Regulatory Changes / Focus (Patriot Act,Analyst conflict of Interest, Accountingstandards)
8. A Split between Product Manufacturing andDistribution
9. New Investment Products (ETF, HedgeFunds, 529)
10. Consolidation / Convergence Hangovers
Source: TowerGroup
Business Drivers
AUTOMATEDTRADING
SCALABILITY- Growth
BUSINESSCONTINUITY
COMPETITIVEADVANTAGE
- Time to Market-- Service reach
REGULATIONSOX
BASLEMIFIDEtc.
OPERATIONALMANAGEMENT
COSTMANAGEMENT
STRAIGHTTHROUGH
PROCESSING
TOTALCORPORATE
PERFORMANCE
Global Securities Industry IT Spending (in US$ Billions)
1996 1998 2000 2001 2002 2003 2004 2005 2006 2007 2008
InternalSpending
External Spending
57%
43%55%
45%51%
49% 49%48% 47% 46%
51% 52% 53% 54%
45%
55%
$39.0
$71.0$69.9$78.2
$83.5$86.2
$62.5
$73.9
Source: TowerGroup estimates
44%
56%
43%
57%
42%
58%
$76.8 $80.1 $83.0
CAGR = 4%CAGR = –7%CAGR = 49%
Global IT spendingstabilizes…and rises
-2.5%
2.5%
4.1%
4.3%
4.5%
4.5%
5.0%
7.0%
-4% -2% 0% 2% 4% 6% 8%
Market Data
Middle Office
Back Office
Retail Trading & Sales
C.C. & Custody
Other
Institutional Trading & Sales
Asset Mgmt.
Source: TowerGroup estimates
Global Securities Industry IT Spending (Percentage CAGR, 2004 – 2008)
But it won’t be spent all in the same place…
The global growth in hedge funds has notslowed down
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
Assets Under Management (right axis) No. of Funds (left axis)
Source: Van Hedge Fund Advisors International LLC *estimates
$billions
Assets continue to flow into hedgefunds
Source: Tremont Research
$0
$20
$40
$60
$80
$100
$120
$140
2002 2003 2004
$billions
0
1,000
2,000
3,000
4,000
5,000
6,000
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
NYSE Shares (Right Scale) Nasdaq Shares (Right Scale)
NYSE Trades (Left Scale) Nasdaq Trades (Left Scale)
Average Daily Shares (Mils)Average Daily Trades (000s)
Sources: NYSE, Nasdaq, TowerGroup
While Trade Volumes Continue to Set Records…
0
200
400
600
800
1,000
1,200
1,400
1,600
Jan-98 Jan-99 Jan-00 Jan-01 Jan-02 Jan-03 Jan-04 Jan-05
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
NYSE Shares (Right scale) Nasdaq Shares (Right scale)
NYSE Shares / Trade (left scale) NASDAQ Shares / Trade (left scale)
Average Daily Shares (Mils)Average Shares per Trade
Source: NYSE, Nasdaq, TowerGroup
…Large Block Trading Becomes Much More Difficult
0
10
20
30
40
50
60
Mar-0
2
Jul-02
Nov-02
Mar-0
3
Jul-03
Nov-03
Mar-0
4
Jul-04
Nov-04
ITG Posit
NYFIX Millenium
Liquidnet
Pipeline
Harborside+
ADV Shares (millions)
Source: Company Reports, Towergroup estimates
The buy-side has propelled Liquidnet to the top of theATS landscape
DMADMA Auto-ExAuto-ExTrading
Desk
Trading
Desk
Crossing networks
ExchangesInternalization
Negotiation
single orders
basketslists
programs
ECNs Block tradingfacilities
listed OTCderivatives sectors
equities
Order flow is being re-categorized
Inter-dealer
Volume53%
Dealer to Customer
Volume47%
D2C Traditional
78%
D2C Electronic
22%
2004 Total Average Daily Volume inGlobal Foreign Exchange
$1,773 Billion
$935 B
$840 B
$840 Billion
$655 B
$185 B
Dealer to Customer Volumes
Of the $1. 77T in daily FX turnover, approximately $185B isDealer-to-Customer electronic volume
59%
13%
28%
Interdealer
Dealer to Corporate
Dealer to Buy-side
1998
2001
Source: BIS & TowerGroup
2004Dealer to Institution up 13%Corporates down 3%Interdealer down 10%
53%14%
33%
20%
17%
63%
With the Buy-side becoming moreimportant even in the FX market
The Dealing Room Environment
ResearchTrading/
ExecutionSales
Middle Office
Corporate RiskManagement
Back Office
Clearing- houses
Customer Custodians/ Prime Brokers
Exchanges/ ECNs
Inter Dealer Brokers
OtherDealers
Dealing Room
1999 2000 2001 2002 2003 2004 20050
1
2
3
4
Unconstrained Growth
CostContainment
CostMinimisation
BU $
The Financial Services ITmarket has been turbulent overthe past 8 years
FTSE 100index
City ITCity ITCAPEXCAPEX
CostEffectivene
ss
7,000
Next Generation Trading Infrastructure
What is “Next Generation Trading”?
Market Infrastructure Trading Room
OmgeoArchipelegoLIFFETokyoClaimonitorC and WBT RadianzPhiladelphiaChicagoDeutsche Bourse
What is “Next Generation Trading”?
Market Infrastructure Trading Room
An Architecture for Trading Room
Applications which addresses
Business Issues:Move from Client/Server
High Maintenance Costs/support
Heat Dissipation
Operational Risk Basel 2
Complex Integration
Enabling STP
Reducing Latency – Algo trading
Multiple Data - Latency, AccuracyNeed for Automated Trading SystemsBOTTOM LINE:
“OLD” 1990S DEVELOPED TRADING ROOMS NEED RE ARCHITECTING TO MEET TODAYS DEMANDS
S.T.A.R
S UN: Corporate scale, global reach, RandD
T echnology: Choice, platform, O/S, middleware, Java,SUNRay, Tarantella, JIS
A rchitecture A pplications: Partners
R esources: partners, SUN Services
Next Generation TradingInfrastructure:key partners
Legacy layer: Calypso, ADP Wilco, Sungard
Trading Application layer:Tarantella, Citrix, Dsynapse, Metatomix, CSK, ORC, R-Blue, Sungard, C24, Caplin, Apama Lightstreamer, Transact Tools,Reuters
Presentation layer: Caplin, ePulse, Microsoft. TT Altio
Mobile:BT, LucentTT Altio
Next generation Trader Desktop:KeyTechnologies
Legacy layer: Solaris/SPARC(Mainframe, non stop, AS400)FpML, FinML, SWIFTML
Trading Application layer: Grid,JES, J2EE, Linux-Sol/X86, XBRL, FIX, SUN-GRID,R-Desktop (JES), Identity
Presentation layer: SunrayPortal, JDS, Identity, DirectoryVOiP, Security, Looking Glass,Windows, MSOfficeMobile:
Security, J2ME
Market dataData distribution/TSeries
Trade routing
Platform/S/w Telephony
Presentation
Market
Back Office
Desktop
TradeProcessing
Time seriesStore/load
SavvisReuters
LightstreamerCaplinReuters
ORC
Platform/S/wNew HeightsBT
Presentation
Market
Back Office
Desktop
Transact Tools
Integra
SybaseWombat
20%
The Vision
57%
35%
To develop, sell and implement STARthrough working with Sun's key
financial services partners to create anintegrated cross functional global go to
market plan with supporting demos,collateral and business processes –
leveraging incremental revenue for SUNand partners
Thank you for your time