Benefits of wider access
Why should a pension or investment firm want to link electronically with the outside world?
Access to research, prices andmarkets as well as other firms in the business chain are among the key advantages, according to New York- based technology specialist ITG.
“The number of execution sources keeps proliferating, which means that investors who want liquidity must access a growing variety of markets,” says ITG, in a recent publication ‘From Chaos to Connectivity: A Guide for Institutional Trading Desks Moving Along the Electronic Path’.
Connectivity allows for the electronic communication of information and the “straight-through processing” of investments, from indications of interest, to orders, confirmations, execution and settlement. The mechanical handling of investments is not only less error-prone but also quicker and cheaper. Also, automated systems can handle greater volumes than manual operations.
ITG does not pretend that the task of inter-connecting with the outside world is easy or that all the tools are available to achieve a nirvana of integration. Instead, it suggests tackling the problem one step at a time, making use of technology and financial industry standards and learning from those that have pioneered the route, particularly the investment banks.
“It’s important to note that any connectivity solution, no matter how well conceived, is bound to entail some compromise... Whatever you do, it won’t be perfect, but it will be a step forward,” says the publication.