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Trading on Trading Technology: Q&A

NEW YORK ( TheStreet) -- Exchange mergers, dark pools and algorithmic trading are not just market theory being debated among the world's most powerful banks. They are also daily issues that the financial services industry is pouring billions of dollars of investment to execute and monitor every year.

According to market research firm Celent, global information technology spending by banks and brokerages is expected to increase 3.7% this year for a total of $363.8 billion.

One company taking advantage of the trend is Progress Software (PRGS - Get Report), which provides trading and surveillance technology to large global exchanges, banks and brokers.

Progress' chief technology officer, John Bates, spoke with TheStreet about the role his company plays in the trading fray and how it may benefit from exchange merger mania.

TheStreet: What does your firm do and what is your typical client?

John Bates: One area we have established for ourselves is to help banks produce the technology for high frequency and algorithmic trading. Another area is real time risk and real time surveillance of that trading. We use technology to discover patterns and monitor markets that help clients look for issues, like rouge traders. If a bank can discover a problem before its gets out of hand it can be a real benefit.

In large banks the trading group used to be the only voice. They could turn off risk management. But in todays environment, regulators are becoming more concerned and banks are attempting to employ new surveillance technologies.

As far as clients, we work with dozens of exchanges. Not only the big players, but the emerging players as well. There are many that are not yet public, including new clients in Europe , Middle East and Asia.

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TheStreet: What are some the problems banks are dealing with?

Bates: Markets are getting faster, and there are new and complex ways of gaming the system. We model and capture that.

For example, the May 6, 2010 "Flash Crash." If you look at what has happened in the markets since then there have been dozen of mini flash crashes. Algorithms have gone wrong or a trader has pushed the wrong key. Banks need to monitor that in real time.

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