Capital markets firms are facing a frenzied year. How can analytics services help them to stay nimble and even get some benefit from regulation?
The international regulatory climate is more turbulent than ever before. As the winds of change continue to blow, this coming year will see the final preparations for MiFID II, which most global financial services firms are unable to escape.
Meanwhile, firms who have just looked beyond Basel III now have one eye on Basel IV. The expanding Roman numerals behind regulations give firms the feeling that they are being cast into a series of epics that they don’t want to be part of.
Regulations are dominating firms’ investment decisions. However, it should not be all doom and gloom.
The main driver behind the Markets in Financial Instruments Directive (MiFID) is to achieve fair and efficient markets and increased investor protection.
The transparency obligations will result in a step change in the volume and quality of pre/post trade data in non-equity markets. At the moment, the priorities are on meeting the demands of being compliant.
However, the opportunities to gain alpha or reduce capital reserves cannot be ignored and should be factored into a longer-term technology strategy.
Ranging from the front to back offices, and including the risk and compliance disciplines, here’s how technology might help:
The drive for efficiency, the utilization of resources and cost minimization — or to put it another way digital transformation — has been a key goal for the chief information officer.
Both the buy and sell side have begun to outsource those activities they deem to be commoditized. The lists of benefits are:
- Reduction in technical debt
- Movement from capex to opex
- Reduction in data centre footprint
- Compliance with regulations
Different workloads and workflows require different things from the analytics value chain. Service providers will be expected to tick the box in a number of key areas:
- API access to data or analytics services.
- Deterministic performance across the latency chain.
- Implementation of machine learning to automate manual workloads (i.e compliance).
- Streaming and on-demand compute capability.
- Co-location or low latency feeds.
- Extensive coverage of global market data.
- Access to reference data.
- Hosting — either bare metal or cloud depending on workload and quality of service.
- Ability to distribute content on an enterprise scale to apps.
Given the data growth rates it will be interesting to see how firms look to solve the demands of their business.
What do you think will be key to solving 2017 business demands around market transparency, regulation and compliance?