The derivatives market is heating up and IT spending on derivatives management will experience a steady increase according to a report by Aite Group. Industry spending on derivatives management technology will exceed $7 billion by 2009, up from $6.3 billion in 2005.
Returns from equities and fixed-income markets aren't gaining momentum and an increasing number of firms are turning to the derivatives instruments to rev up portfolios. The increase in the hedge fund activity has increased the demand for alternative instruments such as the offerings of the derivatives market.
Processing derivative transactions remains mostly a manual process prone to human error, which can result in financial losses. BAck-office automation is needed most and should account for the bulk of the increased spending.