Sunday, June 26, 2005

2005 SIA Technology Management Conference: Making Way for New Players

The 2005 Securities Industry Association Technology Management Conference was a get-together notable for the degree of shift in the marketplace for financial content services displayed at the conference's exhibit hall. The show is getting smaller in overall space and even as the booths being presented are mostly smaller and representative of a broader array of smaller companies servicing this marketplace. Notably the historical push of big market data companies dominating the show are long over. The Reuters exhibit still dominated the entry to the show but one you got past a spread-out set of Thomson kiosks and the vestiges of ADP the marketplace for fully integrated market data solutions begins to thin out very rapidly. Instead the new center of gravity for the show is the array of exhibits provided in the third floor ballroom of the Hilton by technology giants such as Microsoft, HP, IBM and the increasingly dominant presence of Sungard. Traffic seemed fair and informal "how's the show" queries seemed to elicit a lot of enthusiasm from smaller exhibitors looking to initiate serious conversations, but the buzz was mostly with solutions that bypassed content vendors in favor of financial firms and content technology companies.

The REAL center of the show has become the institutions that are the focus of integrating securities trading technology into their core trading strategies. Beyond the usual suspects of major investment banks are companies such as Lime Brokerage LLC, a boutique trading company a the SIA show billing themselves as a "direct access securities broker." Yes, it's a source of trading liquidity for hedge funds and other trading partners, but at least as important in their selling proposition are their trading technologies and interfaces. In other words more than ever content vendors are competing with their customers for defining the value-add layer of content services supporting specific market niches, as increasingly those layers are essential for defining profits as well as managing expenses. Thus Reuters, with its algorithmic trading services featured at the SIA show, finds itself trying to stay a step ahead of their clients' improvements in program trading infrastructure capable of managing trading via proprietary algorithms consuming realtime and fundamental financial data. With the value and advantages of specific sources of financial content becoming more transitory and proprietary than ever, the dissipation of interesting content product displays at the SIA show is a pattern that's likely to continue for some time.

In an environment like this the traditional product development lifecycle for most aggregators appears exceedingly slow in comparison to what their customers are doing with heavy investments in trading and market data infrastructure. So although the solutions-oriented displays by Reuters focusing on hedge funds, asset management and direct feed management showed many powerful capabilities, these are solutions for increasingly smaller and focused market segments. They at least seemed more focused than the more generic solutions being shown at the Thomson display, which featured at one point a presentation on the importance of Intel processors in their solutions mix. With solutions such as Reuters RDF Direct allowing its clients to consume feeds from exchanges and clients directly without the inherent latency in centralized ticker plants, even as Hyperfeed takes over the Reuters TRS trading room platform to manage distribution of content at client sites, the model of The New Aggregation is in full flower in financial market data: specialization in specific aspects of content aggregation that work best for a given model while abandoning those that are best provided by clients or technology companies.

While the SIA show remains a valuable outlet for financial content vendors it is becoming increasingly hard to find the diamonds in the rough at this venue. The main ballroom exhibits of technology companies do provide a particular focus for the exhibition, but there's less and less rhyme or reason to any of the other display areas. Where do I go to find network solutions? Trading floor solutions? Up and coming content providers? While the Hilton facility has always had limitations in this respect the fragmentation of the industry and the propagation of small suppliers providing displays makes this an increasingly frustrating exhibition to traverse. Most exhibits have become far too small to gain any sense of what a vendor is trying to accomplish. Since space is not at a premium at this point it would be nice for the pricing for exhibitors to reflect the changing face of the industry to encourage more vendors to present messages that stand out from the pack.
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