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 inflated the estimated time and cost required to drive far-reaching change. That being said, in capital markets I have seen fundamental change delivered safely and 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 blotter and to a desktop thats decision-oriented not data-oriented. More importantly, trading technologists will unburden ourselves of the headwinds that have stifled innovation over the last decade. Here are some more of my views are they ambitious enough?
In the world of listed instruments, ensuring product data is correct before the market opens every day is a cottage industry in 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 security master in the cloud will provide the canonical, clean, up-to-date data set for instrument identifiers, corporate actions, index constituents and anything else thats shared. Data will just work.
Similarly, exchange and client connectivity could be rationalized through cloud. With just 1 connection, a broker dealer would be able to connect to all exchanges and to their clients, without worrying about high-availability, exchange testing, FIX versions, client specific implementations and other aspects of connectivity administration.
Before 2008, you could argue that if the airline industry was like capital markets that every airline would build their own planes. A need to continue to drive down cost and focus resources on differentiating services will accelerate the move away from this model, so much of the remaining duplicative infrastructure will become commoditized and move centrally into the vendor domain.
This could include much of the existing order management, risk management, crossing and automated trading infrastructure, with vendors providing the containers and market participants able to plug in their differentiating strategies and extract specific 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 reporting and compliance requirements can be mutualized and managed centrally.
You can argue the accelerating effect that tech has on front office productivity is much slower than it should be. With the cost improvements and reduced complexity described above, there would be enough bandwidth to drive material improvements to move toward advanced UX and workflow.
The grid or blotter is a great case in point. It has been the staple method of data visualization for at least 25 years. The blotter is data oriented and it drives a do-it-yourself workflow: here is the data, go find information, make a decision, and then act on it. In the future systems will enhance productivity by being decision oriented and the implied workflow becomes more progressive: here are decisions you could make, here is the data that supports the decision, and heres the way you act on it.
Behind this, interoperability between systems should be a given along with the streamlined ability to move between manual, semi-automated, and fully automated modes of operation.
It is reasonable to think that screens will not be the only way to visualize data in 10 years and VR / AR headsets 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 will be normal for apps to be built with multiple modes that make them extremely functional regardless of what device they are being accessed from.
5G will be everywhere, so physical connectivity will become less of a concern, as will network throughput and latency.
It wouldnt be wise to bet against a substantial improvement in a companys capability to generate revenue from its unique data and information, and in the future, to monetize their proprietary methods for interpreting that data.
Any transactional and analytical data that exists will be available whenever and however its needed and will be clean, trusted and integrated to boot. This principle 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 advantage of this.
Finally, the way clients are approached and managed will likely continue the rapid evolution we have seen over the last decade. The information and technological capability of the buyside will continue to increase, and the sellside will combine their expertise in market and liquidity dynamics with innovative data analysis and visualization techniques.
On the face of it, nothing above is particularly radical.
But to achieve it there needs to be more effective collaboration between market participants than in the past. Additionally, there should be an improvement in the ability to deliver multi-year transformation projects and move beyond the barriers imposed by legacy technology estates. None of this will be easy. However, with the constant drive for efficiency, the cost savings combined with ongoing strengthening of the fintech community could provide the catalyst and means to drive change.
At Velox our mission is to provide an application platform to our clients that maximizes their ability to innovate rapidly. Would be great to hear your opinions on factors that you think are missing.