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The role connectivity has on the Investment Banking industry

In the highly competitive world of investment banking, exceeding customer requirements is the only sure-fire way to guarantee market share. As such, investment banks need to be able to deliver reliable results quickly, while keeping an eye on how they can innovate within the field.

At surface level, connectivity, specifically for investment banks may be perceived to have minimal impact on business performance. However, the potential of connectivity in a fast-paced industry, reliant on making snap decisions, is evident.

The impact that fibre optic connectivity has had on the trading floor has been noteworthy. The increased capabilities of data transmission and the speed of trading can certainly be attributed to the implementation of improved connectivity. These are not the only changes to come about from improved connectivity, the focus on expediency and utilising data has seen a knock-on effect, causing investment banks to re-evaluate their business models, therefore using data to improve innovation and IT strategy, ultimately, enhancing the customer experience.

Fibre optic connectivity has transformed the trading floor

Trading floor environments have been radically transformed over the past decade. After the tradefixing scandal, regulatory changes have impacted market behaviour, with traders no longer as aggressive as they were. Despite this, the value of online foreign exchange trading has grown to $5.2 trillion a day. Today, individual trading companies execute thousands of online trades every hour, with millions of online trades transacted daily. In this environment, minimising network latency is essential. Fractions of a second can be the difference between successful identification and exploitation of an opportunity, and complete failure. The speeds that many market participants are now able to harness to engage in high frequency trading are astonishing - but processes across the sector are also being influenced by the rapid, constant development of data transmission capabilities and increased network speeds.

Within the best managed companies, change has not simply been reactive. Instead, there have usually been proactive efforts to enhance the use of technology. New solutions have been developed that can turn endless streams of data moving through systems into actionable business intelligence. These give senior managers greater visibility of operations in real-time; with the ability to inform both strategic decisions and the development of new products. Consolidation of a firm’s market share plus the creation and exploitation of innovative new products, will be impossible without adequate capacity in the communications capabilities that link front, middle and back offices, and the data centres that support them.

In the last decade, the look, atmosphere and culture in trading rooms have changed beyond recognition. Trading volumes have increased significantly, and many traders are now tech, as well as market, specialists. Trading floors simply need much greater communications bandwidth than most other types of office environment. For bankers and traders, durable, high capacity, reliable, secure and scalable high-speed data network connectivity is no longer a nice-to-have. As such, downtime, nor the financial, operational, reputational or legal damage associated with security breaches, will be tolerated by customers who are themselves often facing intense financial and competitive pressures.

Harnessing the power of data in a competitive industry

Financial services have always stored large amounts of historical data and are gaining good ground in making use of it in real-time. However, to offer a truly exceptional experience to customers, these businesses need to work to integrate both operational and analytical systems in order to enable better analysis and modelling, efficiency improvements, and (essentially) faster time to market.

No company that wants to build and maintain an effective brand presence in these markets can afford downtime or security failings. As such, every technology partner with which the company is considering working with should be able to demonstrate its ability to provide always-on reliability and expertise in the identification and mitigation of security vulnerabilities.

There was a time when a diagram of an investment bank’s communications requirements would have made a very simple graphic. Today, competitive pressures and the realities of the interconnected trading ecosystem mean that such a graphic would look considerably more complex. Therefore, investment banks must put customer needs at the heart of their IT and communications models.

IT strategy designed with excellence in mind

The business model of investment banking is changing. There is a greater focus on IT strategies for operational excellence as well as enabling greater business intelligence. This means that IT buyers are understandably attracted to new technologies, all of which can play a very useful role in consolidating and streamlining what are often unwieldy, outmoded IT infrastructures. Both virtualisation and orchestration can help make IT infrastructures more resilient, as well as improving network efficiency, performance and flexibility.


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This post is from a series of posts in the group:

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

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