EFFICIENCY AND COST EFFECTIVENESS: 2015 DRIVERS FOR TECHNOLOGY SPEND

EFFICIENCY AND COST EFFECTIVENESS: 2015 DRIVERS FOR TECHNOLOGY SPEND

2 Over the past few years, capital market participants have invested heavily in technology and services to meet critical regulatory deadlines and achieve stronger competitive positions. Now they intend to leverage their existing infrastructures and invest in new technologies to reduce costs and become more efficient, according to IPC s 2015 Capital Markets Technology Trends Survey. The third annual survey of capital market participants, many of whom are technology influencers and decision makers, found that almost half (46 percent) believe that improving efficiency and cost effectiveness is the primary driver of technology spending in 2015, up from 32 percent in 2014. What do you think will be the primary driver for your firm s technology investments into 2015? Now, with a number of regulatory deadlines behind them, C-suite executives are scrutinizing margins and demanding that IT deliver more efficiency to the organization. Based on the IPC survey, financial institutions will focus on three key areas in 2015: Optimize existing network infrastructure Increase productivity and efficiency of trading desk and trading floor Utilize managed services and support to comply with regulations The initiatives are both broad and challenging for IT teams, who will continue to support existing business operations while striving to meet management s 2015 goals. The good news is that the majority (58 percent) of respondents expect their firms to increase investment in technology spending in 2015. 46% 22% 15% 14% 10% Improve efficiency and cost effectiveness Gain competitive advantage Accessing new markets Replace legacy technology Comply with new regulations 58 % Expect their IT budgets to increase This comes as no surprise, given that during the past several years the capital markets industry, like so many other financial services businesses, have seen costs increase and margins decrease due in part to regulatory mandates. While savings have been squeezed from many areas of the organization, the industry continues to be constrained by inefficient technology platforms built for a bygone era.

3 TRADER TECHNOLOGY THE NEW FOCUS FOR 2015 While network services and infrastructure are expected to receive the largest chunk of IT spend in 2015, investments in new technology products and services that enable traders to work faster, better and smarter is a larger focus area this year. Investments in technology aimed at supporting and assisting the trader, trading desk or trading floor were indicated by nearly a third (31 percent) of respondents. In fact, electronic trading technology as an investment focus grew from 21 percent in 2014 to 30 percent in 2015. Technology Investments Planned for 2015 Analytics / BI WAN 11% 12% BCP / DR 9% Electronic Trading 30% Voice Trading Finacial Extranet 8% 7% Network Services or Infrastructure 40% Compliance Solutions Trade Reconciliation - Settlement and Reporting 23% 22% Trading Support (research, risk) Trader, Trading Desk or Trading Floor 31% 31%

4 INCREASED DRIVE FOR MANAGED SERVICES AND SUPPORT Use of managed services has quickly becoming a standard business practice for many industries as a way to costeffectively outsource many business processes, and in return gain efficiency, scalability and best-in-class outcomes. In fact, according to a report by MarketsandMarkets, use of managed services across all industries is estimated to grow from $107.17 billion in 2014 to $193.34 billion by 2019. 1 62 % Of respondents currently use or have plans to use managed services to support their technology infrastructure are turning to the regulatory expertise and infrastructure support of managed services vendors. Nearly one third (29 percent) of respondents indicate they are currently leveraging managed services to comply with regulations. In addition to decreasing their compliance risk, this shift enables firms to free up internal resources to focus on core business functions. With the focus on improving efficiency and reducing costs, many capital markets firms are moving away from maintaining expensive, proprietary systems in favor of managed services. Almost half (45 percent) of survey respondents noted that their organizations already utilize managed services within their technology base. An additional 18 percent indicate they will be implementing managed services into their infrastructures this year. Additionally, rather than invest limited resources toward building in-house compliance technology systems, firms According to a report by Tabb Group and Thomson Reuters, a typical investment bank can spend up to $460,000 on technology related costs every year per front office employee. The report also estimates that firms current spending analysis often underestimates true IT spend, since they exclude human capital costs for IT, which are usually three times as much as hardware, software and data. 2 Thomson Reuters estimates that investment banks surveyed could save close to 20% on the total cost of technology by moving certain elements to cloud-based managed services. 3 1 MarketsandMarkets. (2015 January). Managed Services Market by Managed Data Center, Managed Network, Managed Information, Managed Mobility, Managed Infrastructure, Managed Communications, Managed Security - Global Forecast to 2019. Retrieved from http://www.marketsandmarkets.com/market-reports/managedservices-market-1141.html. 2 Holley, E. (2014, November 11). Capital markets firms woefully underestimate IT costs. Banking Technology. Retrieved from http://www. bankingtech.com/262401/capital-markets-firms-woefully-underestimate-it-costs/. 3 Ibid.

5 CLOUD COMPUTING GROWING IN POPULARITY During an era focused on doing more with less, cloud computing has been a tantalizing prospect for many. By offering the possibility of reduced expenses, easier and cheaper scalability and expansion, and reduced staffing, the cloud has quickly become a technology solution for many companies, large and small. However, the financial services industry, with its exacting requirements and risk of extinction should a firm fail to meet the edicts of regulators, has been a slow adopter of cloud computing. In IPC s 2014 survey, more than half (55 percent) of respondents indicated they would make no use of the cloud. This year s survey finds that cloud-based services are in place by nearly one-third (31 percent) of firms, with an additional third (33 percent) either implementing or planning to implement cloud services in the coming year. 64 % Of respondents currently have or have plans to implement a cloud-based service

6 THE BOTTOM LINE For capital markets firms, 2015 appears to be earmarked the year of self-improvement. The IPC Technology Trends Survey reveals that financial firms intend to spend more in 2015, but unlike in years past, their efforts this year will be to improve the efficiency and cost effectiveness of existing operations and systems. Network services and infrastructure, trader technology, and trading support are key areas firms will focus their attention in order to reduce response times and business costs. According to the IPC survey, this directive will be supported, in part, by the increased acceptance and deployment of cloud computing and managed service providers. Managed services have already played a crucial role in helping firms successfully meet compliance mandates. As firms continue to explore the potential of utility-style technology services, managed services are expected to play a larger role in the infrastructure of financial institutions. Additionally, cloud computing has made definite inroads into the financial services industry as firms recognize they can improve performance in key operational and technology areas by using the cloud.

7 SUMMARY OVERVIEW The survey was conducted over three days at the Futures Industry Association Expo in Chicago in November 2014. Respondents represented a broad range of job functions in the futures industry, from traders to IT support to senior executives. Over half (59 percent) of respondents indicated they have a strong say in the technology acquisition process, with 15 percent empowered to approve technology budgets and 44 percent able to influence technology budget spending. 30% Job Function 12% 20% 9% 29% Executive Trader/Broker Back Office IT Other

ABOUT IPC IPC is a global provider of mission-critical network services and trading communication technology to the financial markets community. With complete focus on this sector and over 40 years of expertise, IPC provides customers with integrated solutions that support traders and participants across the entire trade lifecycle including sell-side and buy-side financial institutions, inter-dealer brokers, liquidity venues, clearing and settlement firms, independent software vendors, corporate finance departments, financial information exchange providers and market data providers. IPC s offerings include a unified communications/application platform, award-winning trading positions, managed voice and data connectivity solutions, compliance technologies, infrastructure management and a suite of enhanced service offerings. IPC s global reach extends to more than 60 countries including a network of 5,000 customer sites over 700 cities and an installed base of approximately 120,000 trading positions deployed worldwide. Headquartered in Jersey City, New Jersey, IPC has over 900 employees located throughout the Americas and the EMEA and Asia-Pacific regions. IPC s mission is to continually innovate to support collaboration across the global financial community and address our clients needs in an ever-changing landscape. For more information, visit IPC OFFICES AROUND THE WORLD AMERICAS IPC Corporate Headquarters Harborside Financial Center/Plaza 10 3 Second Street, 15th Floor Jersey City, NJ 07311 T: +1.201.253.2000 F: +1.201.253.2361 EMEA IPC London Office Tower House 67-73 Worship Street London EC2A 2DZ, England T: +44.(0)20.7979.7200 F: +44.(0)20.7979.7224 ASIA PACIFIC IPC Hong Kong Office 3301, 33/F, The Center 99 Queen s Road, Central Hong Kong T: +852.2899.8088 F: +852.2869.6892 GLOBAL OFFICES North America: Jersey City, NJ (Corporate Headquarters); Alpharetta, GA; Boston, MA; Charlotte, NC; Chicago, IL; Conshohocken, PA; Fairfield, CT; Houston, TX; Los Angeles, CA; New York, NY; San Francisco, CA; Toronto, Canada; Westbrook, CT; Murray Hill, NJ EMEA: London (Main Office); Frankfurt; Milan; Paris; Zürich; Geneva Asia Pacific: Hong Kong (Main Office); Beijing; Jakarta; Kuala Lumpur; Melbourne; Mumbai; Seoul; Shanghai; Singapore; Sydney; Taipei; Tokyo Copyright 2015 IPC Systems, Inc. All rights reserved. The IPC name and logos are trademarks of IPC Systems, Inc. All other trademarks are property of their respective owner. Specifications and programs are subject to change without notice. Certain statements contained in this press release may be forward-looking statements. These statements may be identified by the use of forward-looking terminology such as anticipate, believe, continue, could, estimate, expect, intend, may, might, plan, potential, predict, should or will or similar terminology. Any forward-looking statements are based on current expectations, assumptions, estimates and projections. Such forward looking statements involve known and unknown risks and uncertainties, many of which are beyond our control. Actual results may differ materially from any future results expressed or implied by these forward-looking statements.