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Page last updated
February 15, 2003




Looking For New Opportunities in Global Markets During Times of Market Uncertainty


Since the European markets have not experienced as steep a rise nor as sharp a decline as the US markets, we can expect more of a recovery from the US markets than we will from Europe. As investors look at where to put their money, investment managers are being very cautious as to not only where, but also how they are investing. For example, investment managers that were primarily US-focused are now looking at the overseas markets, and those firms that have been investing globally are contemplating increasing their investment weightings in those markets.

Investing exclusively in the US is becoming less of a focus and expanding to Europe and other global markets has become imperative for money managers. As the US markets begin to exhibit signs of recovery, portfolio managers are continuing their reach for a more global focus and major overhaul of the way that they conduct their business. Additionally, institutional investors see a greater need for improving their internal technology to handle this increase in exposure and diversification, and regain control internally when it comes to their investment strategies.

New Technologies
As the traditional broker-dealer finds ways of reinventing and expanding their products and services, there are many smaller technology firms and broker-dealers specifically focused on meeting the demanding needs of the new investor. With the buy-side increasing their area of focus, this presents a crucial need of finding effective methods of reaching liquidity. Cross-border trading within Europe and global connectivity has raised the question of how to simplify global reach. Connecting the different global exchanges to create a single point of entry to reach all market liquidity is something that benefits both portfolio managers and their traders. Decreasing execution costs, minimising market impact and increasing trade automation processing are more important than ever as we see the uncertainty of the markets before us.

Investment managers are demanding their traders to increase their participation with trading by dealing with their brokers more and increasing trading orders themselves via electronic trading systems. The ability to take control of their orders gives fund managers the ability to improve on executions by minimising the market impact.

As the US is very fragmented on the front-end of trading, Europe sees their challenge on the back-end. Even with settlement system consolidation overseas there are still costly hurdles to overcome. The need for seamless trading through a single point of entry to reach global markets and streamlining settlement and clearing issues across the world is what both investors and traders want to happen so as to simplify their global reach. With a single access point, trading becomes highly efficient and quality of execution rises consistently across markets-keeping overseas trading costs to a minimum.

Technological advances have resulted in the creation of an efficient and streamlined trading atmosphere for all participants, and can be used to consolidate access to multiple pools of liquidity. These technologies are crucial in times of market uncertainty.

Advanced communications technologies are also demystifying global trading by making it uniform, fast, reliable and inexpensive. As the equity markets continue to evolve and global securities converge, the globalisation of markets and the trend toward electronic trading has enabled traders and investors to trade anywhere and anytime in the world. Real-time prices, high-speed multiple market access through agency brokerages, and high-functioning order management and trade reporting capabilities are providing institutional-level traders with the same tools for cross-border trading that they enjoy for domestic trading.

The Current State of Affairs
In the months following the terrorist attacks of September 11, the global markets experienced the most sluggish of times. Coming on the heels of an already depressed global market and burst of the Internet bubble, the attacks forced the current bear market into a deeper state of hibernation-creating even more market uncertainty as the US markets were shut down for four days, the longest since World War I.

Following the attacks, many expected US market volume would decrease. In fact what happened was just the oppositeit increased not only in the US, but also in the European markets for three primary reasons.

n Market Uncertainty-As the worldwide markets continue to experience volatile times, investors are feeling pressure to spread risk. Investors are hesitant to put all of their dollars "in one basket" and are reducing risk by investing on a global scale.

n Technological Advances-We have seen the emergence of trading platforms that consolidate markets through one single platform. For example, Stockholm-based NeoNet Securities has created a trading platform that equips the institutional investor and broker-dealer community with a single platform for direct stock exchange execution-connecting more than 80 percent of the European equities market through one platform.

n Customer Demand-Even though the buy-side has been traditionally slower to adopt new technologies than the sell-side, all traders are feeling pressure to look at the global markets and develop a new strategy that takes a global investing position.

The Road Ahead
As information technology spending continues to increase, new technologies are expected to emerge while existing ones will mature, eliminating many of the technological barriers to global trading and helping to create a true universal trading environment for all participants.

As increasing numbers of buy- and sell-side traders seek to gain a competitive advantage through technology, they will be looking at trading platforms that combine global market access with trade management functionality. Other factors playing a decisive role in the adoption of global trading technologies include a desire for cost-effective ways of processing trades and access to global liquidity pools.

As we look to the future, one constant remains: the need for proven technology solutions will continue to grow as investors look for a competitive advantage and for ways of securing the best industry position possible for when the world's financial markets fully recover.



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