Both asset managers and securities services firms are struggling to keep up with the wave of technological innovation taking place in the market, senior market participants have claimed.
Panellists at the DTCC’s Client Forum in London highlighted how both the buy-side and sell-side are challenged with implementing real technological solutions as constant innovations such as artificial intelligence, robotics and distributed ledger technology (DLT) flood the market.
“The main challenge for the buy side is the recognition of the pace that technology is advancing and is outpacing our ability to implement solutions. We haven’t yet solved how to vet, control, implement and realise the value quickly enough,” said Sean Kennedy, head of investment operations, EMEA, Vanguard.
“So that is what we are working on right now—how to embrace new innovative solutions because whatever we are looking at today, there will be something more interesting tomorrow. We are going to need to be able to consistently pivot which is not too disruptive over time, and can be beneficial as opposed to constantly tossing something out and bringing something new in.”
Kennedy’s remarks reflect similar comments made by experts at Sibos 2018 in Sydney, in which some believe fund managers have been slow to incorporate big data into their day-to-day operations, and some refusing to pay for data in the current cost-constrained environment.
Alan Cameron, head of brokers market strategy, BNP Paribas Securities Services, echoed similar challenges in keeping up with technological innovation, largely due to the complexities of being interconnected with so many market infrastructures.
“Trade finance banks have been able to do so much more than securities services banks because trade finance banks do not have to interact with so many infrastructures,” explained Cameron.
“It is not about the different financial communities, but that we are all bound together by these infrastructures. These infrastructures are very useful to us, but they are also what makes progress so slow and difficult sometimes.”
The trade finance industry, which has mostly been based on paper transactions, has seen a wave of DLT innovations over recent months, with HSBC and ING most recently carrying out a blockchain trade finance deal involving an electronic bill of lading.
Securities services banks have yet to make similar strides, with the potential adoption of smart contracts for securities transactions and the tokenisation of assets still a theory.