Risk technology market fall-out expected, survey finds

The UK trading and risk management technology sector appears to have reached over-saturation, with a number of vendor companies expected to disappear over the coming two years, according to a technology survey published by Kimsey Consulting.

The Somerset, UK-based, financial consultancy firm issued a report, ‘2002 UK Dealing Room Survey’, which focused on sell-side technology issues, including the size of the market, the amount being spent by companies on trading technology, as well as emerging trends and new technologies.

The survey found that the risk technology market is one of the most crowded areas in the technology field. This includes middle- and back-office systems. The apparent over-supply comes in stark contrast to the situation several years ago, when there was a paucity of effective vendor solutions, the report said.

“A crowded market will ultimately witness the demise of many participants, either through business failure, or merger and acquisition, and unfortunately – for buyers – the surviving vendors will not always be the providers of the best solutions,” said the report.

Stephen Kimsey, head of Kimsey Consulting, said many of the survey respondents reported they were more likely to turn to bigger risk technology vendors that can typically offer cheaper solutions. But smaller firms supplying risk technology to specialist organisations such as hedge funds could still be profitable, he added.

Of the 59 companies surveyed for the trading and risk management technology providers, four said they used Summit, owned by Misys, four used SunGard, while 18 said they used in-house systems. Other systems mentioned included Kalahari, Murex and Condor.

The Kimsey survey collated responses from around 60 sell-side financial institutions, including major investment banks, brokerages and other sell-side institutions, reviewing information on some 15,000 trading positions.