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Study: U.S., European Brokers to Spend Millions on Surveillance

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Sweeping regulatory changes will lead U.S. and European brokers to spend more than $200 million in 2011 on new market surveillance programs, according to a new report.

The TABB Group LLC, New York, published this finding in a summary of results from new research. The 26-page report describes how changing regulations are creating new responsibilities for brokers who must reexamine the business case behind their surveillance solutions.

The study estimates that U.S. and Europe will spend $206 million this year on new market surveillance programs.

With hundreds of laws yet to be written and rules to be implemented, the report adds, spending will grow at a CAGR (compound annual growth rate) of 14% to $268 million in 2013.

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To comply, TABB Group expects that spending on external solutions will grow to 35% of total expenditure in 2013 from 28% in 2011 as brokers leverage vendors’ products to fit tight budgets and meet short timelines.

“It falls on the brokers as the primary intermediary between investors and exchanges to assist regulators in making sure that market surveillance catches up to the real-time dynamics of the market,” says Miranda Mizen, a TABB principal head of European research and author of the new report

“Today’s surveillance programs are like a patchwork quilt, she adds. “Some programs monitor comprehensively in real time. Others look backward, but recent market abuse scandals and the May 6th flash crash have revealed there is a yawning divide between the way markets operate and the way they are actually being surveilled.”

–Warren S. Hersch