Spending on trade surveillance technology was already growing at a clip but it could exceed expectations due to Covid-19 and the pressures placed on firms’ compliance infrastructure, according to a new report from Greenwich Associates – Trade Surveillance Solutions – Evolved, Effective and Essential.
The report shows that over the last decade, annual growth rate for the trade surveillance technology market was 13% to 14% growth. Earlier in the year, Greenwich estimated this would translate into a $1.2 bn spend figure although it anticipated yearly expansion rates would likely decrease in velocity as the market moved into a more mature phase of growth.
Today, the picture is different after cracks appeared once the virus spread and lockdown ensued. Volatility soared and firms had to grapple with a host of problems including obtaining monitored and secure system access as well as difficulties in receiving alert backlogs at those with insufficient surveillance resources to manage soaring market volumes and turbulence.
In addition, there were issues in adjusting monitoring capabilities and holistic surveillance integration as communication channel usage transformed overnight.
These factors have led the consultancy to revise its forecasts for 2021 to $1.5bn, a 7% hike on its original projection, representing 23% in overall spending growth.
The buyside will account for a larger proportion as demand for insider-trading detection, communications monitoring coverage and holistic integration increased at a much faster pace than anticipated earlier in the year.
“Then COVID-19 hit and financial service firms suddenly encountered a perfect storm of compliance challenges,” says Danielle Tierney, senior advisor for Greenwich Associates Market Structure and Technology. “Some firms were simply unable to maintain compliance and surveillance monitoring while continuing operations during at onset of the crisis.”
As with any growing market competition is intense with Greenwich identifying over 50 providers jostling for position in the surveillance and monitoring technology arena.
On one end are the stalwarts such as Nasdaq Trade Surveillance with a 20.5% chunk of the market and NICE Actmize with a smaller 5.8% slice while at the other end are the potential disruptors such as Eventus and SteelEye in terms of product development
However, as the Greenwich report points out, although not complacent, “the established leaders will maintain their positions through continued investment in product development and holistic functionality, although both may see more competition in their specialty areas by emerging competitors.”
However, it adds, “the core base of Tier-1 customers is unlikely to be swayed by lower price points, as they have been satisfied by functional developments and innovation.”