Complexity in Capital Markets Connectivity

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23 June 2020

Morphing Connections in Electronic Trading


Connectivity is an area of rapid technological change that pulls together many pieces and players that must mesh perfectly, especially in a world of fragmented liquidity, operating at nearly nanosecond time scales. Given the different pieces and players, it is not surprising that connectivity in the capital markets can mean different things to different market participants based on the type of firm where they work and their role in the organization.

There are numerous changes in capital markets that has created a myriad of vendors offering products and services in cooperation or competition with other players. We provide an overview of the vast landscape of vendors providing client, market/exchange/venue, market data, and post-trade connectivity.

Looking forward, Celent anticipates that the already complex landscape will undergo continued technological evolution and business changes. These developments will require vendors and their buy side and dealer clients to stay nimble and flexible as they adjust to the upcoming changes.

Key Trends in Connectivity

·Rise of e-trading across assets: Divergence in purpose-built connectivity for asset classes based on more electronic and algorithmic trading.

·Cost and commercial model: Managed services, connectivity and the emergence of new commercial models for partnering and outsourcing parts of the connectivity chain.

·Control of network: Evolution in the control of the network as buy side and sell side firms look for a single provider to help them manage their spaghetti of global trading demands.

·Cloud: Expansion of the use cases for the cloud from analytics to execution of trades.

·Client engagement: Developments in areas such as machine learning for holistic insights from different trading channels (i.e., electronic and voice) to address friction in client engagement.

·Security/privacy and compliance: Connectivity demands driven by concerns about security/privacy at the same time that compliance requirements from a risk and regulatory perspective create tremendous pressure for monitoring tools to ensure that all types of connectivity operate correctly.