A bank’s peers, partners, clients, counterparties…. All demand and expect greater transparency, to keep the markets efficient and fair. Just as importantly, from a risk and profitability standpoint, organisations must strive to achieve greater internal transparency up and down the chain of command.
The first post in this series discussed Decrypting Financial Reform, and the second Regulatory Transparency and Data Management Best Practices. To finish off, transparency for Markets and Management...
To formalise market-led transparency, the Dodd-Frank Act and MiFID II in particular are imposing new levels of openness, for both the trading community and consumers. As they push OTC derivative trading to centralised clearing, more standardized contracts will become the norm. A demand for liquidity at the expense of the bespoke will likely further impel this.
Shareable and Digestible Data
From a technology standpoint, new and existing exchanges, and the MTFs (Multilateral Trading Facilities) will push for interoperability of data and systems. Suddenly, what was a collection of parallel and siloed systems must now become a synchronous ecosystem. This will include readily digestible data stored in an accessible high performance infrastructure, and a host of compatible services (pricing, risk management tools etc.) in an integrated marketplace.
As discussed in a previous post, the Cloud is a potential route for the sharing of data and services.
To complement the sharing of market and pricing data, better tools for collaboration of unstructured data (documents, emails, phone calls etc.) will come to the fore. With the exception of email and IM, these tools are only currently available at the department or firm-wide level; but now market transparency will trigger the introduction of collaboration tools to secure communities – for example between buy- and sell-side, or between hedge funds and prime brokers, or even between fund managers and the financial advisors who sell their funds.
There’s a real opportunity to be at the heart of the communities here with the right technology.
So there are regulatory and market pressures; but, more importantly, it is a firm’s own need for transparency that should drive changes in operations and technology. To holistically execute accurate performance measurement and risk management, financial institutions must appreciate their end-to-end positions, and the counter party risks they are exposed to.
This requires big data: fully integrated sharing of real-time and historic information across all divisions within an organisation; and small data: information on individual positions and transactions at a very granular level.
On top of implications for database infrastructures, one significant technology need is rich visualisation. The consumption and absorption of data for decision making is critical – and more and more this means better ways to visualise and manipulate the screens dynamically. David Cox covers this topic in detail in this post.
So what technologies do you actually need?
It is difficult to distil the thousands of pages of overlapping global regulations into a simple operational and IT strategy. Each firm is starting from a different point, with different budgets and priorities. Regulations are still evolving, and we can expect an ever more complex and changing regulatory landscape.
Transparency at all levels is obviously essential. As shown throughout these three blogs, this has wide-reaching implications on operations, and will touch multiple levels of the technology stack. To get off to the right start, we recommend the following.
- Get the basics right: flexibility and standardisation of database platforms, schemas and accessibility.
- Have a consistent storage strategy built for future needs: from historical retention to real-time updates and events processing.
- Deploy state of the art Business Intelligence and data visualisation tools to understand it all. That’s the only way to leverage the data assets being stored.
- Remember to factor in collaboration tools and workflows to share information appropriately.
- Partner with peers in an ecosystem of natively compatible applications and services designed for your industry’s needs.
- Leverage the flexibility of Cloud computing power (platform as a service, software as a service, from both public and private clouds) to bring it all together in a streamlined and effective way.
This post is the final in a three part series on Transparency:
- Decrypting Financial Reform: The Three Dimensions of Transparency
- Regulatory Transparency and Data Management Best Practices
- The Other Dimensions of Transparency: for Markets and Management
To understand and discuss these topics in more detail, Microsoft Business Talk is also hosting an executive roundtable with the Tabb Group on June 8th 2011 in New York. The discussion will look at new trends for data management and analysis including real time processing, data subscriptions in the cloud and semantic search. Click here to register: Risk and Data Management: Trends and Innovation