US Market Reform: It’s Almost Here

Financial technologists can breathe a slight sigh of relief as the US Senate and House of Representatives finished hammering out the final version of the financial reform bill in conference committee earlier today. Each chamber still needs to hold a procedural vote on the final bill before it is sent to the president to be signed into law. Considering the timing, I expect we can plan to see an early morning photo op as President Obama signs the bill in the White House rose garden.

The bad news is that most of the reforms will require major system redesigns within every investment banking organization. The good news is that at least the industry knows what to expect now that the final version of the bill is done.

Earlier this week, IBM and the Securities Industry and Financial Markets Association (Sifma) released an IT spending survey based on Sifma membership and the top concern that 80 percent of the responding financial technologists had last year was "business model uncertainty." This year, according to the survey's authors, that percentage has risen to 86 percent.

Another interesting figure from the report is that 50 percent answered that they plan to allocate between 20 and 30 percent of their IT spending to transformational activities.

Considering that most firms currently divide their IT spending 80–20 between keeping their lights on and innovation, this is going to knock IT budgets out of kilter for at least the next two years and probably beyond.

I feel that I need to make some obligatory comments on this year's Sifma Financial Services Technology Expo. To be honest, the event is mirroring everything that is happening in the industry. The markets are down, and there were fewer exhibitors displaying at the show, but the organization pulled off a smaller and more innovative show than in the past. I'll put it down as a success.