TABB Group, in its newest research note, “Reg NMS: Launching the Next Arms Race”, reports that brokers’ trading systems are changing at an even faster pace in response to the implementation of Reg NMS by the SEC, requiring even higher levels of routing complexity, faster execution speeds, and bulging storage capacity.
According to Larry TABB, CEO and TABB Group founder, “This is the first report industry-wide that examines the state of brokers in a post-Reg NMS period, since its recent implementation. It focuses on what brokers are doing and how Reg NMS will impact their future positioning.”
The research note is currently available online through Selero, a provider of Reg NMS compliant order routing, smart routing, and trade execution for trade internalisation and market making. Fred Horn, CEO of Selero, says, “Reg NMS is proving to be the impetus for broad based IT upgrades for many brokers, just as Y2K was the impetus behind investments in ERP in the late 1990’s.”
According to Matthew Simon, research analyst at TABB Group and author of the note, Reg NMS affects all brokers trading on the US markets, and incremental IT expenditures driven by the Regulation vary depending on each one’s strategy, industry position, and current trading infrastructure. In particular, top tier brokers are largely building on their existing trading systems, and second tier brokers are looking to service providers to help them implement the capabilities they need. Regardless, “all brokers need to closely monitor the effectiveness of their systems as Reg NMS goes into effect and the implications of dark pools, latency, order volumes, also trading, and other variables play themselves out. That means flexibility and the ability to adjust course quickly in response to first hand experience will also be critical to success,” notes Simon.