Investment Banks may face direct competition from global stock exchanges in coming years, a BearingPoint study released Wednesday found.
As global stock exchanges continue to lean toward consolidation, as seen in the recent merger between the NYSE and Euronext, the study says it could leave little choice for exchanges but to enter into the traditional world of investment banking.
The study, titled Shifting From Defense to Offense: A Model for the 21st Century Capital Markets Firm, predicted that capital market firms will also increase their use of technology to create highly detailed client profiles, allowing companies to tailor-make products and services to meet individual client needs
BearingPoint surveyed executives in leading capital markets, asking how their firms were preparing for the coming decades challenges.
“We can expect to see an even more dynamic shift over the next 10 years as exchanges, which are searching for profits and growth more aggressively than ever before, muscle their way onto the playing field,” says Peter Horowitz, managing director of BearingPoint Financial Services.
“As a result, sell-side firms must begin preparing immediately to use technology to both capitalize on alternative revenue opportunities and identify new ones.”
Capital market firms will be forced by necessity, the study continues, to develop an organizational structure to track client “investment DNA” to allow banks to provide banks a consolidated risk and finance profile of each client. This information could be used to design custom products according to client profiles.