A new report from Forrester Research Inc. says that Reuters is building the basic infrastructure for global electronic trading, and that dealers should get on the bandwagon.

Forrester says that so far, dealers have resisted letting third parties like Reuters play a central role in equity trading, but that smart dealers will partner with Reuters.

Forrester says the Reuters infrastructure will be able to provide the network for cross-border equity trading, will take a leading role in bringing electronic trading to small investor and will eliminate the data bottleneck.

“Without real-time access to accurate securities descriptions, corporate actions data, allocation instructions, figuration details, and settlement instructions, investors prefer to transact by phone. Reuters will change this by pre-filling order-management systems with updated trade data and performing real-time error checking,” says Forrester. “With the necessary infrastructure in place, a global network with clean data, dealers should reprioritize their efforts. Rather than sinking money into networking initiatives like Nasdaq’s SuperMontage and Network NYSE.”

It says, dealers should rely on third parties such as Reuters to back up and integrate the exchanges; to provide the local knowledge for global trading; and to create trust between network participants.

“After the September 11 attacks, eSpeed found it difficult to transfer trading in US Treasuries from New York to London not because of technology failure, but because of London’s lack of familiarity with US market practices. To protect their trading businesses and drive the growth of global trading, dealers should create refined trading algorithms for all but the least actively traded securities in a large number of local markets.”

Forrester says that electronic trading is key because it helps dealers to minimize operating risk, and that investors will adopt electronic trading anyway to reduce trading costs.