In uncertain times, what is “essential”?

We are learning a lot about what is deemed “essential” in this unprecedented public health emergency. A lot has also been written about the potential virtues of remote working, and what habits might persist post-crisis. In capital markets, some trading platforms have been stretched to breaking point due to huge increases in volume during some of the most volatile market conditions ever experienced. The reliance on technology has never been clearer, and many of our clients are looking closely at what really is “essential” during this time. They are also looking forward, and evaluating where they need to focus their innovation efforts, to position themselves to achieve lasting competitive advantage in an even more rapidly changing market.

When speaking with our clients in recent weeks, there are two key areas consistently at the top of their priority list; how did our existing platforms perform in terms of resiliency and reliability, and how robust were our key business processes at the most critical times?

Resiliency: Start the migration journey now

There have been some very public outages of major trading platforms in recent weeks with spiking volumes cited as the culprit. These incidents were not just limited to the much publicised retail fintech platforms, such as Robinhood; multiple institutional platforms were also reportedly down at vital times during market swings since the crisis took a hold - and that is just the external facing incidents. As our clients constantly remind us, institutional platforms often only get one chance to fail, as recovering confidence of such a demanding customer base can be difficult, or even impossible. The reported volume increases on market venues also illustrates that incumbents with the largest pools of liquidity are attracting record volumes, in a time when getting the trade done is imperative. These venues need to run seamlessly or risk the liquidity shifting to a rival.

One well-documented solution to this issue is migration to the cloud to benefit from on-demand load balancing and auto-scaling in times of high stress (without having to hold this capacity on physical machines). While this is a long term goal for many, there is large upfront investment required to migrate legacy platforms and it does not happen overnight.

In particular, the technical approach to running real-time platforms in the cloud can also be very different to deploying on bare metal, for example, the need to overcome the lack of multicast capability. Although the cloud providers are closing these gaps at a rapid pace, there are still many gotchas internal teams will need to learn the hard (and expensive) way. Competition for talent in this area is also at an all time high, so accelerating this transition using the assistance of experienced third parties could be a prudent move.

Migrating to the cloud not only brings increased resiliency capacity, but also adds dynamism to the product roadmap. Deploying thin frontends in the cloud increases the ease of access for remote workers and clients but also brings new security concerns. However, many financial institutions are now understanding that these concerns are outweighed by the advantage achieved by being responsive to changing markets and allowing business lines to capitalize in ways slow-moving legacy platforms and products are incapable of.

Many large financial institutions still operate in a manner where technology platforms are aligned to business silos and are architected in a closed manner, even to other internal platforms. This has the obvious issue of duplication of effort across technology teams but, as importantly, this limits the compatibility of these businesses to share data (where appropriate) and to provide complete, consistent, and timely information to management for decision making. Attacking this problem iteratively is key, as replatforming entire organisations to the cloud in one-go is impossible (or at least not advisable!). Stakeholders need to identify the business lines or individual platforms that would benefit most from upgraded estates and build them in a utilizing a more open architecture ensuring future platforms, data feeds, and workflows can be incorporated in a consistent manner across business lines.

Automation: Think about workflows not applications

Many of our clients have been focusing on “electronifying” workflows for the past number of years. The main drivers for this have been compliance with regulations and cost saving through automation. Many of these efforts are part of much larger “digital transformation” programs which consume huge amounts of resources. These programs can sometimes become detached from the business demands over time, and are viewed as a drain rather than an enabler of further innovation by business lines. The current situation with COVID-19 is sharpening the focus of some of our clients and increasing their understanding of the value of to re-evaluate the approach of these large programs.

Taking front-office workflows specifically, more and more voice trading is becoming electronic, particularly in FICC. This includes internal sales-trader interactions as well as increased volumes of trading on various third party venues. Understanding the evolving business processes involved here, and laying the technological foundations down to quickly streamline workflows, can give big advantages in fast changing market structures.

Additionally, with this rapid change, unstructured communications through various chat tools and voice conversations are used heavily. The data extracted from these interactions are invariably mapped to semi-structured formats and, in order to be accurately processed, eventually (and laboriously) mapped to structured data models. These mapping steps can be very inefficient and error prone. Focusing on “shifting left” to structured data as soon as possible in the workflow is a key element of any approach. Our clients have had the most success through developing bespoke tooling and putting these tools directly in the hands of the front office to enable this shift. Additionally, adhering to evolving open standards in desktop platform interoperability, such as FDC3, helps to extract value from legacy front-ends while modern, light-weight web-based UI components can be used to bridge gaps and help front-office users efficiently complete high-value workflows.

Our clients often ask for advice on which workflows to attack first when planning out these programs. Unfortunately, there is no silver bullet for this; but committing to a workflow-driven mentality (as opposed to being siloed/monolithic application-driven), and embracing approaches like domain-driven design and EventStorming, help drive out the high-value workflows for individual business lines. Combined with the open desktop interoperability approach, workflows can be electronified and, ultimately, automated efficiently without large ongoing technology expense or delay.

As a financial technology solution provider, Adaptive are very accustomed to a demanding and rapidly changing environment. However, recent events have brought new perspectives to this and we are looking forward to working closely with our clients to help define the new normal. Ultimately, what is essential has not changed. But we feel that the reflections and lessons taken from this crisis will sharpen focus and drive innovation to truly create value in an even more dynamic market structure.


Fergus Keenan Picture

Fergus Keenan

Director of Adaptive USA,
Adaptive Financial Consulting


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