The Future of the Capital Market Technology Vendor Landscape

A Shift Towards Customization & Accelerated Builds

In the complex world of capital markets, there’s a significant disconnect between the objectives of technology providers and the market participants who utilize their software. This article delves into the current state of affairs and suggests a new approach to tackle these challenges.

The Vendor’s Dilemma in Capital Markets: Selling Generic vs. Customization

There’s a hidden tension in the world of capital markets technology. Software vendors and the firms buying their tools often have conflicting goals. Vendors naturally want to cast a wide net, offering tools with general capabilities that appeal to a broad audience of market participants. This makes perfect business sense – selling a single, standardized product is far more efficient than managing a collection of customized versions for each client. This translates to lower development costs, faster release cycles, and a smaller support team needed. Additionally, standardized products benefit from economies of scale by selling the same product to a larger audience.

The Buyer’s Desire: Competitive Edge at Minimum Cost

However, this approach can clash with the needs of market participants who crave a competitive edge through differentiation. This relentless pursuit of differentiation fuels their desire for customization, requesting bespoke features that cater to their specific trading strategies, algorithms and workflows.

Vendors are often forced to resist extensive modifications. The core issue lies in the challenge of recouping development and maintenance costs. Since customizations are rarely broadly applicable across the vendor’s client base, they lack the scalability needed to justify long-term support. There simply aren’t enough firms that find value in the highly specific features requested by a single market participant.

This lack of scale can also create a perverse incentive during the sales process. Vendors dedicate significant resources to understanding and potentially even building bespoke features to win the initial sale. However, once the system is deployed and the firm’s needs evolve, addressing these new customization requests becomes a financial burden. These post-deployment needs don’t translate into additional revenue for the vendor. They simply create a growing support burden for functionalities that have limited applicability across the wider market. This ultimately leads to a situation where the vendor struggles to maintain the quality and security of these bespoke features.

The result? A system that discourages innovation! Vendors are hesitant to invest heavily in customizations because they can’t guarantee a return on their investment. This, in turn, limits the ability of capital market firms to adapt and differentiate themselves, hindering overall industry growth.

A Better Path to Technology Differentiation in Capital Markets – Building at Speed

Adaptive offers a unique solution to this problem. We do not attempt to solve for the entirety of a market participant’s requirements through our own IP or pre-packaged products. Instead, we prefer a model where through a combination of underlying platform accelerators and development tooling, we make a hybrid approach economically viable for market participants.

Through this hybrid approach (some elements come out of the box, some are developed), market participants gain access to two key elements:

• The Underlying Core Platform Technology: This pre-built platform (like our Hydra Platform) eliminates the need for financial firms to invest significant time and resources in building their own, none-differentiating infrastructure. Something they often lack the deep capital markets expertise required for optimal functionality. Technology has always evolved through building on increasingly higher levels of abstraction. Our capital markets-tuned platform simply raises the level at which market participants can build on top.
• High-Quality Developer Tools: The developer tools are specifically designed for the front office of capital markets and empower firms (or indeed Adaptive) to build bespoke, custom functionalities on top of the underlying core platform, enabling them to address their unique trading strategies and workflows.

The Power of the ‘Accelerated Build’ – Key Advantages

The above approach yields significant advantages for firms looking to deploy differentiating technology, fast. Let’s look at some of the advantages in a nutshell:

• Faster Time to Market: One might think that an accelerated build approach results in a slightly slower initial time to market for the deployment of a Minimum Viable Product (MVP) as some parts of the stack need to be developed. In reality, we often find that we can, in fact, deploy an MVP faster than a vendor can roll out a pre-built solution. This is due to the complex technical architecture of market participant’s front offices and the irreducible complexity of integration between different domain models.
• Reduced Costs and Delivery Risk: By leveraging a platform, such as Hydra Platform, you avoid the high initial and on-going cost as well as development risks associated with building the underlying non-differentiating parts of your infrastructure. You can focus your resources on what truly matters – developing differentiating features that give you a competitive edge.
• Long-Term Agility and Innovation: This approach empowers you to continuously build and deploy differentiating features post-launch. You’re not reliant on vendor roadmaps, allowing you to adapt quickly to changing market conditions.
• Focus on Differentiation: Our high-quality developer tools allow you to leverage our unique expertise so that you can build functionalities that truly set you apart.

In conclusion, this approach proposed by Adaptive offers a viable solution to the disconnect in the capital market vendor landscape. By focusing on a higher level of customization and allowing for unique, differentiating requirements, market participants can achieve long-term differentiation and flexibility, bringing unique propositions to market.

Learn more

Technical Intensity

Learn more about how firms in an increasingly digital and innovative world, need to own their technical future to truly differentiate with this presentation that our CEO, Matt Barrett, shared in TradingTech London Summit in 2022.

Matt Barrett, CEO & Co-Founder at Adaptive

Matt is the CEO and co-founder of Adaptive Financial Consulting.

He graduated with a Master’s in Computer Science from Auckland University, and moved to London from New Zealand in 2005. Matt worked as a software engineer in a range of industries, always trying to align the engineering work he was doing with business value. Within financial services, he spent time at Societe Generale and Barclays, before co-founding Adaptive in 2012.

Driven by a belief that high-quality engineering and client-centricity go hand in hand, Adaptive crafts cutting-edge, bespoke financial technology solutions for electronic trading across capital markets. Adaptive is for those firms who value differentiation via technology.