Financial markets firms are significantly increasing their IT budgets to improve competitiveness, according to research published today (Thursday).

A study by analyst Datamonitor found an average 11 per cent increase in IT budgets this year compared with last year across financial markets.

Amit Shah, the report’s author and analyst in Datamonitor’s financial services team, says the increase is significant compared with the steady three to four per cent rise invested by such firms over the past few years.

‘Banks are pushing investment in IT to derive more value from each transaction through algorithmic and electronic trading,’ said Shah.

Investment bank Dresdner Kleinwort’s London chief information officer Steven Ashton, capital markets are booming.

‘People are looking to spend more on IT because they are looking to gain competitive advantage,’ said Ashton.

He says IT can reduce transaction costs, generate revenue and improve competitiveness.

‘Both types of investment give you a return but obviously revenue generation is more incremental, though they are both worth it,’ said Ashton.

The report predicts a strong uptake of electronic trading in the near future, although Shah says only a handful of firms are using all the functionality electronic trading has to offer.