Despite a relatively frothy options market, proprietary traders are not scooping up trading systems the way they used to. That’s because the details of the so-called Volcker rule, designed to curtail banks’ speculative trading, are still being hammered out.
"We’ve seen projects get canceled in some of the larger banks," Marty Leamy, president of the Americas division of Sweden’s Orc Software, told Traders Magazine. "And also in some of the proprietary shops."
Orc is a niche vendor that sells automated options trading software to market makers and prop shops. Its customers in the U.S. are mostly based in Chicago; some are in New York, as well.
Business has slowed of late, due to wait-and-see attitudes among some of the players, as regulators in Washington shape the new Volcker rule. The regulation is named after former Federal Reserve chairman Paul Volcker and was part of the recently passed Dodd-Frank financial reform bill.
The value of Orc’s software contracts in the Americas dropped to a two-year low at the end of September, hitting 138 million Swedish krona (about $20 million). It peaked at SEK 170 million in early 2009. Orc has operated in the U.S. for about 10 years.
Despite the stasis, Leamy is bullish on the future. He expects traders exiting banks to land with hedge funds or foreign banks operating in the U.S. "The Canadian banks are licking their chops," Leamy said. "Our business is up with those guys."
