How Banks and Brokers Are Upgrading Their Trading Systems

Banks and brokers are under increasing pressure in today’s rapidly-moving markets: reduced margins, increased regulatory burdens and higher customer expectations of real-time execution, insight and seamlessness. These firms still use monolithic architectural designs, mainframes that are decades old, custom trading systems, and data silos which inhibit innovation, speed and scalability. It is no longer just about technology. Modernising systems now has strategic value.

Here I will present an analysis of the driving forces, challenges, and solutions for trading system upgrades within the financial sector, then shine a light on the companies that are actively involved in transforming outdated financial systems. CHI Software is a partner that I have highlighted in the past.

Why the Upgrade is Inevitable for Banks and Brokers

A. Market & business-drivers

1. Volume, speed, and complexity of trades remain high (for example, the average daily U.S. stock volume was approximately 11 billion shares in 2023). These volumes can cause traditional systems to struggle and can reduce the capacity for innovation.
2. FinTech disruptors and new competitors – Crypto, digital brokers and algorithmic trading platforms are changing investor expectations and forcing incumbents into modernisation to maintain their competitive position.
3. Real-time data and analytics demands – Traders and brokers need richer insight, faster decisioning and connectivity to new front-office/back-office workflows.
4. Research has shown that banks with an older infrastructure may be at risk for slower reporting, greater error rates, and non-compliance with regulatory requirements.

B. Opportunity for Value Capture

Modernizing trading systems is not just a defense; it opens many possibilities. The company is about to experience a shift in cost, time to market, customer experience, risk control. A study by McKinsey & Company illustrates modernizing with generative AI reduces costs by 40% and timelines by 40-50% in legacy systems.

How Trading Systems are Being Modernised – Key Approaches

Financial organizations approach upgrades differently based on how much risk they’re willing to take, their budget, and what their goals are. The patterns below are some of the most common.

1. Refactor/rearchitect

The original logic of the application is kept, but it is rewritten/updated to the new languages, new modulating structures (microservices), and modernized architecture.

Example: fragmentation of services from a monolithic architecture, the introduction of APIs, and containerization.

Advantage: Improved flexibility and retention of the business logic.  

2. Re-host/lift and shift

Applications are moved (usually with little to no modifications) to more elaborate infrastructures (cloud or virtualization) hosting the applications.

Advantage: Minimal risk and cost is preferred but it is possible that a technical debt will be introduced that will inhibit the desired flexibility. 

3. Greenfield wholesale replacement

Replacing legacy architecture with new systems: preferably a cloud-based trading platform with microservices, open architecture, and modern UI. High risk and high reward: the speed of innovation will increase, but so will the complexity.  

4. Hybrid/staged migration  

The more sensible approach where the most critical modules are moved to modern architecture first (ex. order management, risk computation) while keeping the other legacy modules. This risk-averse method will favor continuity of operations and innovation will occur more easily.

5. Cloud-native / Microservices / API-First Approach

Cloud scalability and container orchestration (Docker, Kubernetes) have trading systems benefiting from microservices and event-driven architecture. This allows faster implementation of new features, superior data throughput and improved resilience.

6. DevOps, CI/CD, Automation and AI-Enabled Tooling

In the combination of modern engineering practices (automated testing and CI/CD) along with generative AI that analyzes legacy code, McKinsey notes that it is possible to transform basic code and the corresponding execution logs into higher order specs of the business process, thereby minimizing the need for manual work.

What should we focus on in the case of banks and brokers?

Some areas to focus on when banks or brokers modernise their trading systems include:

Upgrades to the order management system (OMS), execution management system, and exchange integration: ensure latency, throughput, and integration.

• Modernisation of the risk-and-compliance engine: real-time monitoring and regulatory reporting.
• Data-platform refresh: moving away from silos to integrated, real-time data lakes, streaming analytics, machine-learning-driven insights.
• Front-office/back-office connectivity: reducing settlement time, integrating trading, portfolio, operations and risk systems.
• Cloud migration and Infrastructure Modernisation: Leveraging elasticity, resilience, and global footprint.
• Open-architecture and API-enablement: To integrate with fintechs.
• Productivity in DevOps/engineering: faster feature release cycles and modular architecture.

Spotlight: CHI Software and its Role in Upgrading Trading Systems

A key player in this space is CHI Software, which provides what it terms as legacy modernization services (note: “legacy modernization services” is used here as the anchor phrase).

Capabilities of CHI Software

• Taking a consultative approach, CHI Software has expertise in API and technology modernization (microservices, containerization, infrastructure-as-code), and DevOps transformation.
• Case study: One global investment company was assisted by CHI Software in modernizing their internal trading system by migrating from a monolith system to a microservices + AWS architecture.
• The company emphasizes a consultative approach to modernization, focusing on assessing the current state, formulating the best route for planning, and executing the modernization process with minimal disruption.

Why Does this Matter to Banks/Brokers

• Trading systems need to be consistently dependable, quick, and flexible, which is why the modern-trading-platform expertise of CHI Software is immediately relevant.
• With modern “legacy modernization services,” organizations can gradually refactor and re-architecture essential components of their trading system and still maintain market-trading activities.
• They build modern engineering (cloud-native, microservices, and API) that helps organizations reduce costs while alleviating.

What Business Leaders Should Know

• Think about business value. marketplace. modernisation goes beyond technical clean-up: shortening time-to-market, enhanced risk analytical capabilities, less operational cost, lower costs.
• Select partners who understand the financial markets context (trading latency, compliance, settlement chains) outside of pure IT.
• Take a phased, risk-aware approach. Trading platforms cannot go offline for extended periods.
• Modernisation is as much about the culture, the processes, the engineering, as it is about the tech stack. So build DevOps, Agility & Architectural Modularity early.

Other Companies Engaged in Financial Systems Modernisation

Beyond CHI Software, several major service providers are active in transforming legacy systems in banking, capital markets, trading and financial services.

Company		Focus Area		Notable Capabilities
Accenture		Legacy application and core banking modernisation (including AI-enabled)		Their “Legacy Application Modernization Services” research shows they are a leader in this space.
Capgemini		Core banking, mainframe modernisation, banking & capital markets IT services		They provide end-to-end transformation including cloud, hybrid-architecture, and mainframe modernisation.
Others (selected)		Regional / niche players in fintech/investment tech modernisation		These include specialised vendors focusing on trading platforms, data-analytics migration, cloud swaps. (Not elaborated here)

Short Commentary

• Accenture’s “core banking modernization article” focuses on generative AI (see the article).
• Capgemini points out that a large number of banks (85 top 100 banks) still use mainframes from decades ago and require modern platforms to be agile.
• Both emphasize that modernisation does not only involve technology but also aligning the business model, operating model and architecture.

Banks and Brokers Should Consider the Following When Upgrading their Systems:

1. Start by putting together a business case – calculate the cost of maintenance of existing systems, the risk of downtime and missed opportunities to introduce new products or trading venues.
2. Inventory and rationalise: Map systems and identify modules that have the highest business value and technical risk (e.g. OMS/EMS risk engines, settlements systems).
   
   
3. Select the best upgrade method – depending on your risk appetite and constraints, you can choose from refactoring, rehosting, replacing, or hybrid.
   
   
4. Modular architecture and cloud native design will help future-proof your platform and prevent repeating old problems.
   
   
5. DevOps and API-first thought – this will help you to reduce the risk of bugs and latency and speed up your feature release.
   
   
6. Choose your partners wisely – choose vendors like CHI Software that have domain knowledge (trading system, financial services), not just IT skills.
   
   
7. Manage risk and change – trading systems need to maintain uptime, continuity and regulatory compliance. Migration planning, fallback mechanisms, data-validation matter.
   
   
8. Track the value of your tech projects – not only their completion, but also business metrics such as speed of product launch, cost reduction, errors, and latency improvements.