The technological arms race continues...

This is surprising, and might reflect the buyside contribution to the poll, particularly given the sizable layoffs at the major dealers struggling to recoup losses from the credit crisis. Yet, given the developments in the foreign exchange market, the argument to continue to invest in technology as a dealer is compelling.

A factor to take into account is whether the explosive growth in FX volumes over the past few years is sustainable. Most speakers were convinced that, outside of retail FX margin trading, the overall growth rate of the market will slow - a fair comment given that the market grew by 71% between 2004 and 2007, according to Bank for International Settlement figures.

With slower forecasted growth, it's vital to deploy technology that can carve out that little bit more from the still-eroding bid/offer spreads. This has certainly been an area of creativity more recently when providing prices and monetising flow. Some regional banks, for example, are able to internalise up to 90% of their flows due to their uncorrelated nature.

During a comprehensive discussion at FX Week USA on the future role of FX prime brokerage, it became evident that here too dealers can't be stingy. The discussion cut across cross-asset prime brokerage, the cost of credit in today's environment and whether FX prime brokerage is really a commoditised business. According to one prime broker, it is not. He said that, with the growing complexities of the market structure, with the plethora of platforms and their idiosyncrasies, for example, FX prime brokerage is now more of a data management and data engineering business. To keep ahead, you have to have the systems in place to assess and get the most out of your business.

Of course, no discussion on prime brokerage can go without covering costs, which leads to another area that will see continued spend - post trade processing. One of the most active prime brokers on the panel said that, although having a very important role in the market, CLS is still a big driver of costs. The prime broker said that the whole industry is in discussions with CLS about a cost structure that will work for everyone, including pre-settlement netting. That said, there are also ongoing discussions over solutions outside of CLS.