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Capital Markets Insights Quarterly

From our vantage point.

Welcome to the sixth edition of our Capital Markets newsletter where I’m pleased to open with some thoughts and insights. My name is Justin Llewellyn-Jones, Head of Capital Markets for North America here at Broadridge. I’m responsible for business operations and product strategy within capital markets and have over 25 years of experience within the financial services industry, stretching across the trade lifecycle.

Given the nature of today’s macro environment, I’d like to use this forum to discuss technology simplification. More specifically, I’m talking about simplifying trading and post-trade technologies. Capital markets firms face more challenges and complexity than ever before, leaving many of their technology ecosystems struggling to keep pace. Expansions to new markets, asset classes, and business lines, combined with market volatility and volumes, continue to stretch existing technology ecosystems. Multiple issues exist within today’s technology infrastructure, including incompatible or redundant solutions, disparate data formats, manual workarounds, and siloed platforms that each serve a single asset class or market. Add into this industry and regulatory driven change, and we have some compelling reasons to evolve to a better solution.

By streamlining and consolidating systems, we can eliminate friction points between applications that slow trading and operations, cause errors, reduce STP, and increase costs and risk. Simplification is a significant catalyst to improved trading processes and operations, boosting position and sales traders on the front end, risk and trade allocation specialists in the middle office, and operations staff and financial controllers in the back office.

Let’s explore how this works in all three areas:

  • In today’s front office, it is typical to find a multitude of disjointed systems that prevent traders from operating at their peak while margin pressure continues to rise. Simplification by consolidating across asset classes or geographies can help the trading tech stack easily handle market access, client connectivity, analytics, and order management in a seamless user experience, freeing traders to focus on optimising their performance and differentiating themselves with their clients.
  • As executed trades flow into the middle office for allocation, confirmation, and affirmation, simplification helps eliminate the fragmentation and manual intervention that often bedevil this stage of the post-trade journey. Crucially within the trade capture process, unifying disparate processing platforms improves their connections to front-office and clearing-and-settlement systems and surfaces valuable data insights allowing clients’ activities to be managed holistically.
  • In the back office, expanded demands on post-trade systems, increased regulatory and market change requirements, and increased volatility and volume, which require either new workarounds or new investments, challenge firms’ ability to continue to scale and maintain operational efficiency. Simplification can drive automation that reduces risky manual interventions. At the same time, ML and AI-driven predictive analytics help organisations identify problems arising in the clearing and settlement processes before they become exceptions and fails.

There are other reasons for simplification. Massive amounts of data and information is scattered and siloed across the current fragmented capital markets ecosystems. That data needs to be harmonised and normalised so firms can use it to drive actionable insights, whether optimising their collateral management or capturing a holistic view of their clients.

Beyond visibility, the immediacy of data and pressure for real-time access to information have only grown more acute. In the U.S. and Canada, and elsewhere in the world, we are marching towards a shortened settlement cycle, which will require some current trade processing activities to be radically rethought. Real-time processing and access to data can smooth market participant operations preparations for these mandated changes.

Stepping back, I understand how the idea of simplification can conjure visions of generic or homogenous solutions. Rest assured that we strive for simplification that embraces specialisation (of asset classes, geographies, and business segments) along with a fluid common language flowing between and connecting applications. Our innovation roadmap’s core focus involves a platform and provider-agnostic data model catalysing a frictionless architecture. The process of simplification itself must be simple to accelerate our clients’ success.

Furthermore, many firms may fear the risks and disruption large-scale simplification or “digital transformation” efforts often create. But done well, simplification takes an evolutionary, phased approach implemented in a series of incremental steps. Over time, legacy systems and problems phase out while new, better, modular solutions phase in, resulting in a dramatically simplified and modernised technology footprint.

The resulting benefits are well worth the investment of time and resources. For example, we estimate that simplification across the trade lifecycle can reduce addressable costs by up to 30% in key areas, such as reference data management, reconciliations, clearing and settlement, middle office, regulatory reporting, and overall application footprint. Simultaneously, simplification enhances business growth and agility while reducing risk, transforming the technology that supports trading and post-trade functions from a high-maintenance cost center to a high-value competitive advantage.

An optimised, simplified technology ecosystem becomes a force multiplier at every stage of the trade lifecycle. And when a firm’s technology operates more smoothly, it has a greater ability to allocate resources and create strategies that meet client needs, drive revenue growth, and preserve or even expand margins.

Still, it is often the case that firms need help choosing the right place to start, but this is exactly where we can help: by working with our clients to identify the first step toward simplification that results in a journey that ends in true digital transformation.

Beyond simplification, this issue covers a wealth of valuable topics. So, please, read on and enjoy.

Kind regards,

Justin Llewellyn-Jones, Head of Capital Markets, North America, Broadridge

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