A study commissioned by Colt shows that almost half (49%) of buy-side and sell-side traders in Europe, US and Asia believe that delays in connecting to new markets result in missed trading opportunities, and a similar number (47%) believe that it impacts client relationships and causes loss of clients. The survey reveals that resulting losses at investment banks can be as high as $5 million in trading revenues per trading desk each year.
The study, conducted in March 2015, surveyed 289 heads of trading, heads of desk, portfolio managers and hedge fund managers in Europe, US and Asia. The results highlight that market participants believe that the connectivity strategies in place today are negatively impacting access to new markets, client relationships and revenues.
More than a quarter of respondents said that it took them over a month to connect to a new client, with one in ten saying it took over two months. In Europe and Asia 86% of respondents said that delays adversely affected client relationships compared with 36% in US. While 41% of all respondents can access new liquidity sources within a week of the business decision being made, more than half of respondents (59%) think that their desk should be able to access new markets more quickly and approximately one third (34%) think that delays adversely affect revenues. And when it comes to the performance of the connectivity in place, nearly one third (32%) said they experienced technology failures at least once a fortnight.
“In a time pressured trading environment, it is unsurprising that trading desks want to access markets faster,“ commented John Loveland, VP Capital Markets, Colt. “Without the right technology in place at the right time it becomes difficult to meet client expectations and retain strong client relationships, as well as take advantage of trading opportunities as they arise. Both this study and feedback from Colt’s own Capital Markets customers makes it clear that ultra-low latency is not the only consideration when it comes to a firm’s connectivity strategy. Reliable and faster connections to the marketplace are essential to trading desk performance.”
The study conducted by Incisive noted that an increase in regulation and market complexity was also partly to blame for the long delays. The report was conducted by Incisive throughout March 2015 and surveyed 289 people from 12 countries. The respondents were from a variety of buy-and sell-side institutions including investment banks, asset managers, brokers/dealers and hedge funds.