A Strategy for Capital Markets Success in 2019 and Beyond: Embrace These Technologies and Trends

3. Accept the public cloud

As the volume of data—and the need for it—continues to explode, the industry is now seeing a significant shift toward more flexible infrastructure, such as on-premise cloud, public clouds, or a hybrid of both. The public cloud, in particular, is starting to find high levels of adoption as acceptance of the cloud matures. And, according to Greenwich Associates, this is no longer just for non-core services—institutions are getting more comfortable with moving the processing of core market data to the public cloud.

[Related: “Low-Latency, High-Frequency Trading in the Public Cloud? The Time Is Now.”]

In regard to the impact of data and analytics, in some cases the cloud offers the ability to quickly gain access to massive amounts of compute power without having to significantly increase technology costs. Financial services institutions with legacy systems, on the other hand, could have hugely burdensome migration costs to contend with, leaving less budget available for capital investment into new technology, driving a vicious cycle of increased operating costs.

Cost pressures, however, are not the lone driver behind moving to the cloud. If you have a need for agility and horsepower to execute strategic business initiatives, then you want to consider getting on the cloud; but you first need a defined and disciplined plan that identifies your specific goals and analyzes any potential hidden costs.

4. Be open minded about industry standardization

There is broad belief that blockchain, or more accurately, distributed ledger technology (DLT), if implemented at scale, will change the way capital markets and Wall Street conduct business, and could fix inefficiencies and slash the costs of derivatives trading. But that’s been the thinking—or the hype—for a few years now, and we are still waiting for full, real-world application in the industry.

But we may now have the catalyst for the widescale implementation of DLT in the form of a broad industry effort to harmonize the way data is presented and reported, regardless of the platform used. It is known as the common domain model (CDM) and was proposed by the ISDA (International Swaps and Derivatives Association) in May 2017. I think CDM will gain widespread industry support.

What is ISDA CDM? It is a common, industry-standard digital blueprint for how derivatives can be traded and managed across their lifecycles and creates a bedrock of standards upon which new technologies such as distributed ledger, cloud and smart contracts can be built. The implementation of CDM offers the potential for much greater automation and cost reduction, enhancing consistency, efficiency, and the ability to meet compliance needs, as well as boosting the potential for these capabilities to operate across firms and platforms in a common way.

[Related: “ISDA’s Common Domain Model: A Blueprint for Derivatives Trading”] 

The infrastructure that supports the derivatives industry today continues to be complex and disjointed, not to mention extremely costly to maintain. Standardization efforts can instigate automation and efficiency, as well as reduce complexity and costs, by laying the foundation upon which the full potential of nascent technologies—such as DLT and smart contracts—can be realized.

Keep an open mind to a new technology revolution.

This article originally was published on the Numerix Blog.

This content is for TabbForum Gold Membership members only.
Log In Register
TabbFORUM is an open community that provides a platform for capital markets professionals to share their ideas and thought leadership with their peers. The views and opinions expressed are solely those of the author(s). They do not necessarily reflect the opinions of TABB Group, its analysts, TabbFORUM and its editors, or their employees, affiliates and partners.