Austerity is the key word in business and society at large. The ways in which the sell-side industry is streamlining its operations are being enabled by cutting-edge technology, though, and James believes the evolution on display is a key area of interest for all.
The law of diminishing returns is on everyone’s mind—in terms of lessening liquidity in the equities space, or the slashing of operational budgets in banks to provide for capital adequacy requirements. No one has money to throw around anymore. Jobs are being cut, partly due to regulatory changes, but also in an attempt to rein in ballooning expenditure, which includes the bonus culture, which is also facing scrutiny. Flexibility—especially when it comes to technology—is therefore on the minds of financial services executives.
Cloud is hailed as an enabler of limber and reactive business operation. And its proliferation means it’s no longer a case of whether to adopt cloud, but when. Another technology that facilitates flexibility is mobile technology.
A recent webinar focusing on mobility, revealed that even a rudimentary cloud framework is necessary to implement an effective mobile strategy. Hybrid forms exist—BT, for example, is focusing on internal mobility, where traders can leave their turrets to make coffee or go to a meeting, and still have calls redirected to Apple iPads. BT says this is the most pragmatic approach, at least initially. Others, such as First New York Securities, have implemented a total mobility program that extends outside of the office walls.
Vendors that offer this cloud–mobility fusion are gaining traction, as internal pressures at firms begin to force a shift in thinking away from traditional fixed-location ways of working. We live in an interconnected, mobile world, and businesses are waking up to this. Ironing out the wrinkles is the latter stage in the process—the big psychological battle in favor of it has already been fought and largely won.
Outside of mobility, the thinking has also begun to shift away from the idea of possession to one of access. There will always be a need for proprietary technology offerings on the sell side, but firms are more open to outsourcing many of these processes than they were just a few years ago—and this will only grow with the advent of massive regulatory reform and continuing expenditure pressures.
The way outsourcing has grown organically is interesting. Some large banks have sold aspects of their business and then licensed them from third parties to improve balance sheets and reduce maintenance costs. And others are looking at the expense of maintaining their own datacenters when facilities exist that rival their own in terms of sophistication, for a fraction of the cost. Security is improving all the time, so while it will always be a concern, it’s no longer the deal-breaker it once was.
The more subtle ways in which this manifests are in the breakdown of traditional roles, and the expansion of others. Compliance officers are becoming more proactive in their approach to intervention, and the necessity of their increasingly close collaboration with the front office. Perhaps internal police will always be seen as such, but the nature of modern trading means that there has to be a way in which compliance teams can take holistic views of what’s happening and have a way of being forewarned.
Risk, data, resources and technology are all beginning to break out of traditional silos. Whereas 25 different departments may have doubled up their workloads before, it makes no sense to do so now. Why aggregate the same data into the same format multiple times, so that people can then interrogate it in the ways they need, when once will do? It seems like a no-brainer and the technical realities and difficulties in doing so are well-documented. All it takes is for the laws of self-fulfilling prophecy come into play.
While it may hurt, austerity drives aren’t necessarily a bad thing. Darwinism in all senses promotes the idea that those who adapt, survive. The adaptation possible through technology is a fascinating area, and the envelope is being pushed more than ever.
James talks about his trip to Chicago and some of the interesting topics that came up (including a look at disaster recovery demands). Then Anthony and James touch on ISDA's initial margin rules, with Phase 3 going live next year.Subscribe to Weekly Wrap emails