TradingTech highlights complexity, digital and regulatory as top concerns
After two years of restrictions, it was great to get back to in-person events at last week’s TradingTech summit in London. While virtual catch-ups and conferences have served us well throughout the pandemic and will no doubt continue to have their place, there’s just no substitute for hearing the latest industry news and developments in a room full of your peers.
And there was certainly plenty to discuss. The pandemic may have been headline news but the industry hasn’t stood still during this time. With bigger challenges than ever coming up, we noticed three key themes emerge.
Complexity remains a key axiom as the industry struggles to get a grip on environments and businesses that, at times, can feel increasingly out of control. But complexity isn’t the cause of this – it’s a symptom of under-investment, ignoring operational problems because they are hard to solve, and relying on systems and processes that are not fit-for-purpose. There’s no getting away from the fact that trading is an intricate business. But firms should be facing and fighting these complex problems when the nature of the business truly demands it, rather than it being the default, BAU state some firms hide behind when they are challenged over efficiency and operational performance.
Where complexity is undoubtedly increasing is in the broader external environment. Firms need to deal with new approaches to hybrid working, unpredictable market events, and the pressure to adapt to, and leverage, new technology developments which are evolving at a rapid pace.
The second key theme is this digital pace of change that is in fact transforming our industry before our eyes, with digital asset trading coming to the forefront and technologies such as blockchain becoming increasingly part of mainstream projects. Like many other industries, trading businesses are under pressure to leverage these developments for both top- and bottom-line benefits. Digital transformation efforts are focused not only on product development and customer-facing initiatives, but also on optimising and digitising back-end processes and data, which is much needed where a messy web of legacy systems has built up over time, contributing to excessive complexity.
Automating these operations not only makes for a smoother running of the business and a better client experience, it also frees up in-house technology teams to focus on value-adding transformation projects rather than dealing with yet another back-office breakdown.
And finally, let’s not forget the evolving regulatory environment. Just as trading firms are increasingly focused on the digital space, so are their regulators. Firms trading digital assets including cryptocurrencies are bracing themselves for increasing scrutiny as the SEC and other regulatory entities make it clear that digital assets are top of their agenda. Regulators are also paying far more attention to firms’ submissions under trade reporting regimes such as EMIR, MiFID, and FINRA TRACE and CAT.
While these reporting requirements are well embedded in firms’ processes, regulators’ increasing scrutiny of the data behind the submissions means firms will be expected to step up the quality of their data as well as the processes they use to manage and submit it. Again, digitisation is key to automating processes to ultimately achieve the speed and accuracy that regulators demand, and protect reporting firms from punitive fines and reputational damage.
Complexity, digitisation and regulations will only get more challenging to navigate the longer legacy processes stay in place. Now is the time for firms to carefully assess their technology infrastructures and core competencies, and identify gaps to close and opportunities to explore.