Financial crisis signals end of an era in Wall Street IT

Wall Street's financial meltdown promises to forever change the way information technology spending is handled.

Wall Street's financial meltdown promises to forever change the way information technology spending is handled in the securities industry as the old giants of the capital markets stumble and banking behemoths move in to devour them whole or in part, scooping up technology assets.

Lehman Brothers last week tumbled into bankruptcy, sparking London-based bank Barclays]] to pounce at choicest morsels that include two Lehman's data centers and its New York City headquarters building, at a fire-sale price. At the same time, Merrill Lynch, facing its own troubles, agreed to be acquired by Bank of America for about US$50 billion in a stock-swap deal. These stunning developments signal a new era in which more often banks will be in control of IT spending for securities trading technology, and analysts foresee a culture clash coming.

"Banking tends to not need real-time information as much as capital markets," points out Sean O'Dowd, senior analyst at Financial Insights, an IDG Company. "Banks do batch overnight. Capital markets do millions of transactions processed in milliseconds. It's a different type of culture."

"It's the cornerstone of what the next generation of this industry is going to look like," says Robert Iati, partner at TABB Group, a research firm that closely watches the North American securities industry.

And changes may be in store for Wall Street's last two standing investment houses, Morgan Stanley and Goldman Sachs, which are fighting the most severe market meltdown since the 1930's because of the credit crunch.

In this new era, banks buttressed by their core lending will be taking the lead as "one-stop shops," says Iati, with Bank of America possibly becoming a global powerhouse like Citibank, UBS or JPMorgan.

But what are the implications for jobs and spending on IT assets in the securities industry accustomed to lavishing fabulous sums on ultra-fast networks to compete in electronic trading, where today even a nanosecond may count?

"Merrill last year spent between US$3.5 and $4 billion on people and technology," says Iati. "Lehman's outlay was $2.5 to $3 billion." But TABB Group, largely as a result of last week's events, predicts a sharp decline in IT-related spending for the North American securities industry, from $24.2 billion last year to $21.9 billion this year and down to $17.6 billion next year.

Jobs are uncertain at best in a financial-services world facing such unprecedented upheaval, especially where securities trading is increasingly automated, with brokers less needed than in the past.

Lehman last counted about 26,200 employees worldwide. Barclays, the London-based bank, says it's stepping in to acquire Lehman's North American investment banking and trading operations for US$250 million, as well as Lehman's two data centers in New Jersey (where a New York Stock Exchange electronic hub also discretely exists) and Lehman's New York headquarters for $1.75 billion. This is seen as a bargain-basement price for a firm valued last year at $10 billion.

Join the newsletter!

Or

Sign up to gain exclusive access to email subscriptions, event invitations, competitions, giveaways, and much more.

Membership is free, and your security and privacy remain protected. View our privacy policy before signing up.

Error: Please check your email address.
Keep up with the latest tech news, reviews and previews by subscribing to the Good Gear Guide newsletter.
Show Comments

Cool Tech

Toys for Boys

Family Friendly

Stocking Stuffer

SmartLens - Clip on Phone Camera Lens Set of 3

Learn more >

Christmas Gift Guide

Click for more ›

Brand Post

Most Popular Reviews

Latest Articles

Resources

PCW Evaluation Team

Aysha Strobbe

Microsoft Office 365/HP Spectre x360

Microsoft Office continues to make a student’s life that little bit easier by offering reliable, easy to use, time-saving functionality, while continuing to develop new features that further enhance what is already a formidable collection of applications

Michael Hargreaves

Microsoft Office 365/Dell XPS 15 2-in-1

I’d recommend a Dell XPS 15 2-in-1 and the new Windows 10 to anyone who needs to get serious work done (before you kick back on your couch with your favourite Netflix show.)

Maryellen Rose George

Brother PT-P750W

It’s useful for office tasks as well as pragmatic labelling of equipment and storage – just don’t get too excited and label everything in sight!

Cathy Giles

Brother MFC-L8900CDW

The Brother MFC-L8900CDW is an absolute stand out. I struggle to fault it.

Luke Hill

MSI GT75 TITAN

I need power and lots of it. As a Front End Web developer anything less just won’t cut it which is why the MSI GT75 is an outstanding laptop for me. It’s a sleek and futuristic looking, high quality, beast that has a touch of sci-fi flare about it.

Emily Tyson

MSI GE63 Raider

If you’re looking to invest in your next work horse laptop for work or home use, you can’t go wrong with the MSI GE63.

Featured Content

Product Launch Showcase

Don’t have an account? Sign up here

Don't have an account? Sign up now

Forgot password?