Global technology spending on OTC derivatives processing will increase from $187.8 million to $232.5 million by 2011, but the buyside is not as actively involved in these automation efforts as is needed, according to a new report by Celent.
Growth in the derivative market has outpaced operational capacity and in-house expertise, affecting everyone — money managers, fund administrators, and prime brokers.
Some fund managers are willing to cope with manual processes on small amounts of trading; others rely on services provided by prime brokers. For some firms, the complexity is so challenging that outsourcing to fund administrators is the ideal approach.
“It is estimated up to 30 percent of OTC derivative trade confirmations contain an error (or errors) and require subsequent handling for rebooking or amendment,” said Mayiz Habbal, managing director of the Securities & Investments group at Celent. “The buyside purchaser of technology for derivatives processing is still a rare bird. However, the post-trade/pre-settlement technology category is an active one.”