There are studies that suggest that every $1 spent on the Apollo space program paid back $14 in GDP over the next 30 years. Whether that is true or not, it certainly inspired a generation of engineers and scientists to think big.
In more recent times, a reluctance to take risk has affected ambition and has inflated the estimated time and cost required to drive far reaching change. I for one have seen in Cap Mkts, fundamental change delivered safely, an order of magnitude faster than predicted, when the optionality was taken away and it just had to be done.
So, what is the equivalent of a “moon shot” for front office technology. Symbolically I expect we will finally move beyond the ubiquitous Blotter, moving to a desktop that’s decision not data oriented and more importantly, unburden ourselves of the headwinds that have stifled innovation over the last decade. But then I am an optimist with a vested interested!! More of my views below. Not ambitious enough?
Reference Data
In the listed world, ensuring product data is correct before the market opens every day is a cottage industry in of itself. Front office staff live in constant fear of trading off bad data and much cross referencing of sources is required. It is reasonable to think that in 10 years reference data will just work and a “product master in the cloud” will provide the canonical, clean, up-to-date data set for instrument identifiers, corporate actions, index constituents and anything else that’s shared. Data will just work.
Connectivity
Similarly exchange and client connectivity could be rationalized. With just 1 connection, a broker dealer would be able to connect to all exchanges and clients and not have to worry about high-availability, exchange testing, FIX versions, client specific implementations and the like.
Cost Mutualization
Back in the day you could argue that if the airline industry was like Cap Mkts then every airline would build their own planes. A need to continue to drive down cost and focus resources on differentiating services, will likely accelerate the move away from this model and much of the remaining duplicative infrastructure will become commodity and move centrally into the vendor domain.
This could include much of the existing order management, risk management, crossing and automated trading infrastructure, with the containers being provided by vendors and the broker dealers able to plug-in their differentiating strategies and analytics. However, the relationship between client and vendor will need to be different as clients will want to retain much more control and not become beholden to vendor upgrade cycles.
Everyone using a select group of shared products will mean the cost of keeping up with trade reporting and compliance rules and ensuring their accuracy and effectiveness can be mutualized and managed centrally.
Productivity
You can argue the accelerating effect that tech has on front office productivity is lower than in other industries and much lower than it could be. With the cost improvements and reduced complexity described above, there would be enough bandwidth to drive material improvements with much more advanced UX and workflow.
The grid or blotter is a great case in point. It has been the staple data visualization for at least 25 years. The blotter is “data orientated” and it drives a do-it-yourself workflow: here is the data, go find information and make then act on your decisions. In the future systems will enhance productivity by being “decision orientated” and the implied workflow becomes a more progressive: here are decisions you could make, here is the data that supports the decision along with the ability to act.
Behind this interoperability between systems should be a given and a streamlined ability to move between manual, semi-automated and fully automated modes of operation.
Hardware Advances
It is reasonable to think that screens will not be the only way to visualize data in 10 years and VR / AR headset’s will be more ubiquitous. Certainly, the extra dimension will provide a lot more options to keep “the desktop” from being cluttered.
Everything being cloud is a fair bet. Current security concerns should be resolved, and the trading desktop will be virtual and hosted in the cloud. With no guarantee of the form factors being used as access points, it would be normal for apps to be built with multiple modes that make them extremely functional whichever device they are being accessed from.
5g at least will be everywhere, so no physical connectivity anywhere and no concerns with network throughput and latency
Roles
The continuation of front-office skillsets becoming more technical over time will likely continue. The ability of the business to adapt and innovate will continue to be paramount and so sales & trading expertise will be married with the ability to “build” new features and functionality as needed.
The current reliance on EXCEL (and other “user developed apps”) is one way that rapid change (if not innovation) is accomplished and the tools of the future will provide a similar sandbox but with the right levels of control and governance (source code control, auditability, resilience etc) in addition to being fully integrated with the rest of the systems and data on the desk.
It will be interesting to see how much traction gets made with low code style visual interfaces that remove much of the programming element or whether the flexibility and rigor of a formal programming language prevails. Either way, tools will be available to provide configurable, resilient core building blocks and streamline the testing, deployment and support tasks that can be so time consuming.
New Functionality
You would not bet against a massive improvement in a firm’s ability to monetize its own unique data and information or monetize proprietary techniques to interpret that data. Any transactional and analytical data that exists will be available whenever and however its needed and it will be clean, trusted and joined up. This will extend to include new alternative and/or unstructured data sources along with ways to mine and understand them. The user toolkit will be much more adapted to minimizing the product innovation cycle to take the most advantage of this.
Lastly, the way clients are approached and interacted with will likely continue the rapid evolution we have seen over the last decade. The information and technological capability of the buy side will continue to increase, and broker dealers will be combining their expertise in market and liquidity dynamics with these innovative data analysis and visualization techniques to come up with compelling trade ideas along with social media style communication to engage a wider audience.
Obstacles in Our Way
On the face of it, nothing above is particularly radical but to achieve it there will need to be more effective collaboration across market participants than we have achieved in the past along with an improvement in the ability to deliver multi-year transformation projects and move beyond the barriers imposed by legacy estates. None of this will be easy. However with the constant drive for efficiency, the cost save “pot of gold at the end of the rainbow” combined with the continued strengthening of the fintech community could provide the catalyst and means to drive truly far reaching change.