Future of finance: SIFMA Ops 2023 & Waters NAFIS

The capital markets industry has come a long way in embracing technological advancements since 1973 when SIFMA was founded. Innovations that were once feared as disruptive are now actively sought after for the potential benefits they may bring as we march toward the future of finance. Half a century later, that fear has turned into a quest for digitalisation, technological innovation, and operational efficiency. 

As SIFMA celebrates its 50th anniversary, it’s clear the industry has not just survived these changes – it has thrived. The power of cloud computing, the potential of artificial intelligence (AI) and machine learning (ML), and the modernisation of business models – have all led to a golden fusion of technology, processes, and expertise. 

This blend of assets will be critical for driving profitability, cost savings, and loss prevention, especially in a climate where 42% of operations leaders believe we’re in a recession and 80% anticipate one in the next year, according to SIFMA’s pre-conference survey. In the heart of this turbulent time, a beacon of change emerges: the transition to T+1 settlements.

T+1 settlements are top of mind

T+1 settlements were the highlight of the SIFMA Ops 2023 conference, with 90% of pre-conference survey respondents naming it the top industry topic. A separate SIFMA T+1 transition readiness survey revealed that most firms believe they are on track to meet the T+1 deadline. 

As the countdown to the May 2024 deadlines in Canada and the US continues, firms are realising they need to prepare on multiple fronts. Technological readiness, internal testing and resiliency, vendor readiness, client communications, and regulatory considerations all require meticulous attention. As we move towards a future of securities lending cut-off times, same-day affirmations, and potentially increased fail rates due to the shorter settlements lifecycle, the industry is readying itself for this next big leap.

See us next at FTF’s June 15th T+1 Event, Getting Ready for the Race in New York, 
where our CTO Neil Vernon will be speaking on the “Ending the Data Speed Bumps” panel.

However, this journey isn’t without its challenges. As the world population is projected to shrink in the 20 largest economies, the talent shortage is becoming a pressing concern. Meanwhile, the back office has yet to match the acceleration seen in trading, presenting a potential collision point for efficiency. The remedy lies in embracing automation, simplification, and cultivating new skill sets.

And this is where the industry stands on the brink of another revolution: AI and ML. Whether proactively identifying breaks and fails before they happen, explaining outputs for regulatory filings, measuring custodian productivity, or empowering business users with decision-making, AI and ML are set to redefine the industry. As some banks initiate their journey towards “hyper-automation” starting with back-office targets, the future of finance looks increasingly digital, streamlined and smart.

Transforming data, reconciliation and analytics 

The chief data officers who attended Waters’ NAFIS conference in New York last month made one thing clear: The path to this future is paved with data – data lineage, governance, metadata, numerous data sources, and more. The journey from data swamps to data lakes, from raw data to curated, is a critical one. The future is about being data-driven: ensuring it’s discoverable, available, trustable, and valuable. It’s about creating a data culture that is collaborative, educational, and engaging.

Financial services institutions are also focusing on reducing their reconciliations through consolidation which can lead to improved efficiency. Data sourcing and connectivity play a vital role in this objective. In particular, banks and investment managers will face challenges related to relative risk and the impact of expanded trading book regulations, such as FRTB, which is expected to lead to an explosion in data requests, data granularity, data standardisation, and risk reporting. Transforming workflows, trade automation, and strategising data as an asset are key considerations.

Collaboration between technology, operations, and business teams is crucial for success. Organisations should create a data-led culture that promotes engagement, collaboration, motivation, and education. While new technologies are valuable, a holistic approach involving all teams is necessary to drive transformation effectively.

Envisioning the bank of tomorrow

The “bank of tomorrow” will be a place where technology manages risk, maximises opportunities, and transforms workflows. It’s where data is smart and actionable and drives decision-making. It’s where regulations are a challenge, but the solutions lie in the cloud, with fintechs like Gresham helping to navigate these waters. It’s where priorities are clear and change is embraced, but caution is still valued.

With a focus on data, collaboration, and the adoption of AI and data analytics, firms can achieve increased efficiency, mitigate risks and stay competitive in a rapidly evolving landscape. The countdown to the T+1 go-live date is underway, and industry participants must remain prepared and adaptable to thrive in the changing environment.

From fearing disruption to pioneering transformation, the journey of the capital markets industry is indeed a testament to its resilience. As we step into the next chapter, the opportunities for innovation, growth, and success are endless. So, let’s march forward and continue to shape the future of finance.