The cloud has been a catalyst for accelerated development in capital markets. Firms are now using the cloud to become more agile and to increase the pace of innovation delivered to end users.
Technology must work in parallel with regulation in order to move towards a future where innovation can facilitate both the needs of business departments and compliance with regulators or auditors. However, like any new technology, firms need time to understand, adopt and implement it and only when it is mastered, can cloud computing achieve efficiencies such as reducing time to market with high quality and security.
Finextra spoke to Arnaud de Chavagnac, head of cloud, technology and services marketing at Murex about its recent report ‘Building the capital markets technology of the future: A view from the field’ and how market participants are stepping up their game to adapt their platforms to ensure they comply with regulation and offer end users, including traders, risk managers and back office teams, a richer experience.
The intersection of regulation and technology presents challenges and opportunities, having both boosted client expectations but financial institutions (FIs) - particularly large incumbent firms - still have a lot to change. Legacy systems, technology silos across asset classes and duplication after decades of mergers and acquisitions means that in this case, technology has become an impediment, rather than an enabler.
A solution presents itself in replatforming. While some FIs are exploring mutualisation or co-opetition, others are following business models set by technology firms in an attempt to compete with fintech firms. After all, digital transformation has the potential to cut costs, standardise business processes across asset classes and quickly respond to a shifting landscape.
Strategic readiness is imperative when acting decisively. This may involve breaking down silos, collaborating outside of the capital markets sector, merging common functions among the front office, back office and risk and giving clients access to platforms and data in real time.
However, A. de Chavagnac explains that new regulations or simply new data exchange protocols can occasionally result in some legacy applications not being able to cope with evolutions.
“The result is often an IT landscape that includes a lot of redundancies, is not compliant with industry standard, is costly to maintain and very difficult to operate as the regulators require a 360-degree view of P&L-generating activities, particularly all sorts of trades across customer segments in various jurisdictions. The boldest firms have engaged deep replatforming programs aiming at gathering all transactions, positions and functions in a consistent and open manner on one single platform.”
Ensuring agility, sustainably
The cloud can help businesses become more agile and flexible. But how can FIs ensure they’ve picked the right partner to ensure strategic readiness, a track record for delivery and a long-term commitment to investment and innovation?
A. de Chavagnac says: “Strategic readiness is essential for a capital markets platform nowadays as it is impossible to predict which asset class or specific transaction type will become popular and profitable in the future or what will be the content of the next regulation.
“A platform is strategically ready if it already leverages the latest technologies such as cloud, financial formats, industry best practices and can be quickly upgraded to support a new functional feature such as a new pricing model or a new risk calculation required by a regulation. The strategic readiness is hence measured by the time to market.”
A. de Chavagnac continues to explain that a trusted partner would continuously develop new features on its platform, but also deliver a path so that customers can reap the benefits of this innovation within their own unique ecosystems. Achieving this objective with high velocity and standards requires a fast deployment of the platform. What makes this possible is the instantaneous infrastructure provisioning in cloud - a very flexible and reliable tool to manage configuration items between development, test and production installations - and the automation of testing activities to target a flawless delivery with minimum human intervention.
FIs share the same goal of focusing their core business and competencies in order to be in a position to differentiate themselves from competitors. This can only be achieved by outsourcing IT activities that have become “commoditised” over the years. “We believe that IaaS, PaaS and SaaS are becoming the preferred choices of our customers whenever available,” A. de Chavagnac predicts.
“This observation is valid during both the implementation phase and the production stage. The trend is very strong, but it is true that the pace of change is sometimes slowed down by the necessary important changes in IT organisations that have to re-invent themselves in front of new technologies, new collaboration modes, new suppliers and a new SLA with the business.”