June 10, 2019
By John Omahen, Head of Product Management, FIS Post Trade Services
Capital markets is a diverse and highly customized industry, and its technology is no exception. Even after decades of efforts to modernize, the typical capital markets firm’s infrastructure is still a patchwork of systems rife with duplicative data, diverse processes and varied technologies. These tangled webs of code are expensive to maintain, difficult to change and over time pose a real threat to both growth and sustainable profit margins for many market participants.
Many firms have shied away from fully addressing the issue head on due to the amount of time, money, people and political capital involved in replacing this infrastructure. Others point to the near constant flow of new regulatory requirements or mandatory market changes (Brexit, anyone?) as taking up all their attention and budget.
As a result, firms have in many cases doubled down on short-term solutions like hard coding, bespoke processes and in-house builds – exactly the practices that got them into this situation in the first place. They are now asking the hard question: how can I support my unique business requirements, constant regulatory changes and business growth while building out a new model for the future?
The answer lies in
1) tackling the problem holistically with as wide a lens as possible and
2) breaking down processes to their most granular components.
Essentially, you’re designing a new ecosystem of related parts from the top down. Much like the biological term on which it is based, each component in these ecosystems has a distinct function, and there is little waste or duplication.
These components consist of standard and distinct sets of coding. Unlike the biological systems though, these are engineered by design rather than evolved over time by constant trial and error. This means that each component can be independently managed and upgraded, and the components can be combined in a custom way, creating the economy of scale from “build once, sell many times” but able to support the highly diverse capital markets industry.
How is this different from approaches of the past? The answer is how they are built, the tools that engineers can leverage and the scope that providers are offering.
APIs (Application Programming Interfaces) in capital markets were in many cases bolted on to existing systems as the need arose to connect them with many different points. In the modern age, the APIs are the starting point. By combining this approach with the benefits of cloud architecture, where space and CPU can be tapped on demand, technologists are creating a much more scalable environment to support the changes that the market demands. The final coup de grace is that with this new approach, designers of these ecosystems are freed to take a much wider view of end to end business processes that firms are trying to support rather than limiting their vision only to what was traditionally found in a stand-alone system.
The result: technologists are targeting a much wider set of integrated functionality than ever before, giving market participants a chance to rise above their business as usual demands and focus their budgets and attention on the parts of their businesses that differentiate them from the competition.
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