Thoughts on Near-Term Future of Capital Markets Technology
Recently, one of the clients of Toomre Capital Markets LLC ("TCM") asked, in light of the on-going credit crunch, what trends TCM foresaw would be important in the forthcoming year(s) for capital markets technology. Our response was rather downbeat and pessimistic, particularly for those companies focused on leading-edge technology. This also was not the message that the client necessarily wanted to hear.
Our basic view is that the credit crunch will take at least another year to work its way through the financial system. As a result, a number of financial firms will be fighting for their survival and there will be limited budget for new technologies and/or big strategic projects. Hence, most new technology investments will be small and incremental in nature with proven risk/reward trade-offs. This environment for capital markets technology is likely to continue at least until senior management and investors begin to reach a consensus about what the new business model for investment and global banks will be and what revenue streams will result.