Trading firms need to consider the performance and risks that a sell-side platform delivers, after the market disruption that followed the collapse of MF Global, writes Dan Barnes.
In the event that a broker should collapse, or an
independent software vendor (ISVs) should fold, its client base
could find itself without market access. The recent bankruptcy
of MF Global led to customers being temporarily unable to
access the CME market, and the broker’s demise has
hurt several ISVs including CQG, Patsystems, RTS, SunGard,
Trading Technologies and ULLink, for whom MF Global was a
With several big investment banks facing a credit downgrade
by rating agencies and job cuts and legislation paring back
sell-side trading desks, the trading software business is faced
with further uncertainty. That poses risks to the funds,
futures commission merchants (FCMs) and proprietary trading
shops that rely on software supplied by a single source.
"Some of the biggest financial institutions in the world are
telling us that a top five initiative they have this year is
vendor risk management," says James Gellert, chief executive of
ratings agency Rapid Ratings. "Vendor could mean FCM, a prime
broker or a tech provider."
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