Colt Telecom Group, the London-based fibre optic network operator, believes tighter regulation of financial markets will increase demand for data storage technologies.
“The key trends in the financial technology sector for 2011 will include increased regulations on the horizon,” said Tony Moulange, senior business development manager at Colt in London.
Forthcoming regulatory changes in Europe include the creation of the European Securities and Markets Authority, the review of the EU Markets in Financial Instruments Directive and the third version of the Basle Accord on Capital Adequacy.
Complying with these new rules will require more transparency and reporting from financial institutions. Colt believes this will require more investment in storage technologies to cope with vast amounts of data that will have to be held for longer.
From that point of view, 2010 could be seen as a year of transition between the past regulatory environment and a new one.
But regulation is not the only driver for the financial IT sector. Colt cited a report by research firm Ovum, predicting a 4.5% increase in technology spending in financial services next year.
“What we are seeing is a number of trends,” Moulange told FOi. “One, more people want to connect to all liquidity pools. There has been fragmentation of liquidity, with new multilateral trading facilities and dark pools of liquidity that didn’t exist a couple of years ago coming into the space alongside the historic exchanges.
“Second, people want to connect to those liquidity pools at a faster pace, using algorithmic trading.”
Spending prompted by these trends will go, Moulange believes, into two main areas – the drive for ever lower latency in connecting to liquidity; and post-trade processing and storage.
Linked to the latter objective is a push to “link up the front, middle and back offices in a seamless way”.
Colt’s plans for 2011 include rolling out Fast Net Ultra, its “low latency algo trading network, with fibre optic links to exchanges, MTFs and liquidity pools”.
Colt has 19 data centres in Europe, offering colocation and proximity hosting for trading boxes.
“We are lookinging to connect across the Atlantic to places like CME in Chicago,” he added.
Colt’s sister company, KVH of Japan, will connect to Asian liquidity.
“Our customers are always hungry for liquidity,” said Moulange. “We’re trying to facilitate this.”