Exchanges will be

By Theresa Carey  |  Posted 2004-12-21 Print this article Print

in competition"> Equity exchanges will be crossing international borders as well. Were seeing partnerships among exchanges overseas that will, most likely, extend to U.S. exchanges. The NASDAQ is doing its best to qualify for official status, primarily to be able to file an IPO and raise capital. Competition among U.S.-based exchanges will stay hot as the NYSE strives towards increased automation, in an effort to stop defections to the electronic exchanges. Brokerages that operate online are going after the heavy traders—hedge fund operators and financial advisors as well as day traders. Were seeing tiered pricing to lure frequent traders, while less frequent traders and those with small accounts pay higher transaction charges along with maintenance fees. Smaller investors should make an effort in 2005 to pick one brokerage and consolidate their accounts to qualify for better service and lower fees.
Regulations will continue to drive IT spending in the financial sector. The wisest companies are finding ways to leverage regulatory compliance, turning it into information that can be used internally to gain an advantage in the market and externally to make shareholders happy.
As an example, lets look back to the Y2K era. If you were a CIO and you needed money for Y2K in 1999, you got whatever you wanted. The fear was that on Jan. 1, 2000, your accounting system, among other things, wouldnt function any more. None of the regulations out there right now have that same looming threat, though. Nothing says, "Your whole business shuts down if you dont get on the job by this date." Theres shareholder risk if your firm is out of compliance, but no threat to shut down the business. CIOs were able to request money to invest in compliance over the last couple of years, and that trend will continue. Corporations will keep working to comply with both the Patriot Act and with the provisions of Sarbanes-Oxley, since those have rolling deadlines rather than a firm cut-off date. If that work is being done well, there are byproducts that will help a firm analyze its sales efforts in detail: transaction-level data by customer, along with multidimensional profit analysis. To comply, a company has to build an effective data warehouse, which has multiple benefits beyond compliance. Shannon Drost, vice president of the global banking practice at Kanbay International, says, "We have not heard the last of Sarbanes-Oxley or the Patriot Act. Those acts will continue to evolve over the next four years of this administration. If we change parties in the 2008 election, I guarantee that there will be drastic changes—changes could come at you that make you tear down everything youve done and make you start over." Drost recommends installing systems that are flexible enough to handle the waves of modifications that will be necessary as regulations morph. Beyond compliance, the challenges of 2005 will help financial firms as well as corporations that rely on financial technology to manage change, control costs and show results.

Theresa is the Editor of's Finance Industry Center. She's been writing about financial technology issues since 1990 for a wide variety of publications, including PC Magazine, Newsweek, Fortune, and Fortune Small Business. She is also a Contributing Editor to Barron's and writes their 'Electronic Investor' column.

Theresa received a B.A. from the University of California, Berkeley, and a M.S. from the University of Santa Clara. She also has a private pilot's license. When she's not at her computer, she coaches a local high school volleyball team, plays softball and volleyball, and takes part in many Cal Alumni Band events. She lives in Northern California.


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