Blog · 28 Feb 2019

Forget box ticking, it's time to go data-centric in the capital markets

Why you should take a data-centric approach in capital markets.

Tick-box culture is often a bureaucratic burden, but it certainly has its place.

When we fly, for instance, it's comforting to know that the pilots tick off exhaustive checklists to ensure aircraft can safely defy gravity at over 500 miles per hour. And it's great to know that, should we need surgery, medics now tick off checklists to ensure scalpels and dressings are not left inside us.

But in the capital markets industry, given the blizzard of regulations following the global financial crisis, it is perhaps understandable that heads of IT at some financial institutions, wary of massive fines, might want to play it safe and adopt a checklist approach to acquiring and implementing regulatory ‘point solutions’.

But this approach would be wrong headed.

Slavish adherence to tick-box culture can be an innovation killer - and finance firms should not be seduced into taking such a naïve and simplistic approach to their technology implementations, particularly around regulatory compliance.

The reason? There are many ways in which a particular standalone technology might help a business comply with specific regulations - but that doesn’t mean it works with other systems so that, collectively, they offer a future-proof way to ensure business efficiency can be boosted, and so nurture growth. It’s vital to remember that your tech implementation must not only solve your compliance problem, it must also allow your business to prosper.

To do that, firms have to embrace a major philosophical change, one no checklist can really account for: putting data at the centre of their operations. This means abandoning the legacy infrastructures that store data in disparate and disconnected silos. Making information centrally accessible, securely, immutably, and at speed, has the potential to enable lucrative new services that, probably, no-one has even thought of yet. 

This isn’t rocket science: it’s already happening in the retail banking sector, a space awash in innovation. Agile start-ups and challenger banks are quickly responding to evolving customer needs with a data-first philosophy, allowing people to send cash to each other via social networks on their smartphones, using Facebook Messenger or WhatsApp for example. Such services are far easier to operate and regulate with data at the centre of their operations, using clearly-defined, secure APIs that can plug in and access that data.

Imagine trying to do something like that with siloed data, serving different functions, different business units and perhaps stored under different regulatory regimes: the technical challenge doesn't really bear thinking about.

Thankfully, investment banks and brokers, keen to innovate whilst remaining compliant with regimes like GDPR and MiFID II in Europe, and Dodd-Frank in the US, are cottoning on - and are starting to adopt more data-centric regulation-compliant technology (RegTech) across the enterprise.

It’s a smart, future-proof way to go. But it needs a cloud-based, data-oriented digital backbone that lets finance firms get started on their transition to compliant data-centricity with a growing body of RegTech solution providers.

This allows for a de-risked, gradual approach - one in which new systems and regulation-compliant processes can be layered on top of existing infrastructure, so there's no throwing out of the proverbial baby with the bathwater.

As an example, firms can securely ingest trading-related data from a range of sources into our Radianz cloud for regulatory reporting. Then thanks to data-centricity they can then overlay, say, a sentiment-analysing API across that data to gain additional market intelligence. It's only limited by your team's imagination (and regulations, of course).

Despite my scepticism over checklists in the capital markets, I believe this approach really will, ultimately, tick all the boxes.