Five financial markets trends in 2019

Looking forward to the year ahead to try and predict some of the most significant trends that will steer the financial markets forward in 2019 has become a tradition amongst financial technologists. As we kick off 2019, here is my contribution to the debate – five trends to watch out for this year.  

1) Cloud to become ubiquitous. 2018 marked an evident shift with regards to how cloud technology is perceived by financial firms. Overall, global spending on cloud infrastructure grew at an unprecedented pace, accounting for nearly half of IT infrastructure spending in 2018 Q2 alone, according to the most recent IDC data. In 2018, we started to see an increased use of hybrid cloud environments which combine characteristics of private and public cloud, offering the best of both worlds: the flexibility of the cloud and a continued access to data in on-premises systems. In the coming year, such hybrid cloud environments are likely to become an increasingly attractive option to the firms that are keen to increase their cloud technology footprint but are concerned about the costs and risks involved in a complete cloud migration.

2) Distributed Ledger Technology (yes, still!). 2019 will likely be the make it or break it year for DLT. With numerous real-life projects underway, such as CLSNet, a DLT-based bilateral payment netting service launched by CLS in late November, or the launch of bond-i by World Bank, the world’s first bond to be created, allocated, transferred and managed on DLT, there will be plenty to watch out for. Crucial to the uptake of DLT solutions will be getting customer buy-in – a hurdle firms will have to cross in order to achieve the scale needed for DLT to deliver tangible benefits. 

3) The use of Artificial Intelligence (AI) across the entire trade life-cycle. AI was arguably the defining buzzword of 2018 which is ironic for a solution underpinned by machine learning (ML) technology that has been around since the 50s! Regardless, AI’s potential to change the way financial markets operate is undeniable. Applications are already underway at numerous firms in terms of leveraging AI to improve internal processes leading to better client servicing. In 2019, AI is likely to become an integral part of the trading decision making process and key to alpha generation. Additionally, in 2019 I expect to see more firms start to leverage AI for compliance, with a focus on KYC/AML. AI/ML will likely prove particularly useful in helping firms identify high-risk customers and transactions from questionable jurisdictions that would otherwise not be visible to human eye.

4) Upcoming regulatory deadlines. While MiFID II went live early this year with less of a bang than most of the industry had anticipated, further regulatory deadlines loom on the horizon. Perhaps most notably, Securities Financing Transactions Regulation (SFTR), another European regulation with a global reach which is currently slated for implementation in Q1 2020, will require significant preparation. In the US, the long-awaited Consolidated Audit Trail (CAT) system for stock trade surveillance went live in November but the real impact of this grandiose project will only start to become apparent next year – the CAT roll-out timeline spans 24 months.

5) Cryptos going mainstream. Crypto asset trading continues to attract considerable institutional attention despite price volatility. In 2019 we will increasingly see established players enter the crypto space. Known custodial services providers started to enter the market last year already, creating less risky ways of investing in crypto.