Cognito Europe
- Rush to flow’ has resulted in over capacity in some asset classes; needs to be rebalanced
LONDON – 1 October 2013 – A new report from GreySpark Partners, a London-headquartered capital markets consultancy, released today explores the latest trends in investment banking e-commerce, which are the electronic transactional interactions between a bank and its clients. The report, Trends in E-commerce 2013, highlights that if banks are to remain competitive, they should replace their current single-dealer platforms (SDPs) with a new quality of Digital Investment Banking (DIB) platforms.
Following the sub-prime crisis, banks have significantly refocused their trading from complex financial engineering to the distribution of simpler products – a phenomenon GreySpark calls the ‘rush to flow’. The research found that, as a consequence of this refocus and a subsequent increase in e-trading venues, which coincided with subdued transaction volumes, several asset classes are suffering from chronic over-capacity. Until this excess e-trading capacity is withdrawn voluntarily or pulled back in the face of regulatory pressures, the investment banking industry will struggle to achieve pre-crisis profitability levels or investment ratios.
The report focuses on a new breed of emerging SDP – the DIB platform, a cross asset, client centric approach which will set a new standard for SDP dealing capabilities and functionality, supporting the entire trade lifecycle. GreySpark points out that traditional SDPs that spearheaded the transition to e-commerce are reaching the end of their dominance – they are seen as too numerous, cumbersome and narrow in scope. With increasing costs and collapsing margins, it is no longer possible for investment banks – with the exception of flow product specialists – to compete in every segment of the market.
Frederic Ponzo, GreySpark managing partner, said: “Flow monster banks need to refocus their ambitions and re-evaluate their market positioning, technology capabilities and levels of readiness for adaptation to new market structures. With fewer resources, it is vital to choose even more carefully where to invest them ever.”
Anna Pajor, author of the report, added: “Despite the colossal inflation of the technology investment required to bring an SDP to market, proprietary platforms remain unique tools to build and defend an investment banking franchise. It will be interesting to observe how banks adapt to create these platforms.”
The Trends in E-commerce 2013 report is the third of four set for publication in 2013 that builds on the success of the annual Trends in E-Commerce and Electronic Trading report series. The next report in the series will be Trends in Equities Trading 2013 to compliment reports released earlier this year on fixed income and FX trading. The recently published spin-off from this series, Digital Investment Banking – beyond Single-dealer Platforms, is targeted at buyside readers.
For further information on GreySpark’s research, please e-mail: press@greyspark.com
