Conference Dailys TRADETech Daily 2019 | Page 24

THETRADETECH DA I LY in-depth THE OFFICIAL NEWSPAPER OF TRADETECH 2019 “People are now more realistic about the vendor process and are more likely to choose the most coherent bid, rather than the cheapest.” TOM DORIS, LIQUIDNET predicts that by 2025, regardless of the indus- try or sector, senior leaders and managers will spend at least 60% of their time selecting, pri- oritising and driving the execution of projects. Nieto-Rodriguez argues that within the traditional hierarchical organisational struc- ture, quick project execution is not possible. Most successful organisations, he argues, have adjusted to facilitate project execution. The most forward-looking businesses have become project driven: resources, budgets and decision-making power are now based on projects rather than departmental functions. This is happening on the buy-side. Gideon Smith, chief investment officer at Rosenberg Equities, the quant equity division of AXA Investment Managers, agrees that “a mono- lithic legacy system can be very hard, nigh on impossible to migrate.” The difficulties, Smith argues, are not as much technological, as organisational. The key lies in agile project management: it now takes weeks or months to bring new technology to market, he argues, rather than quarters and years as in the past. The buy-side, Smith says, has a lot to learn from Silicon Valley in terms of tech proj- ect delivery, and needs to adopt a culture of weekly stand-up meetings that last 10 minutes. If the project looks as if it might be a failure, then the best thing to do is “fail fast.” Tech projects, he says, should be considered less in terms of a distant final delivery date, with more attention paid to where the project will be in two weeks’ time. Rosenberg, he says, has shifted its management approach to try to achieve such a culture. 24 THETRADETECH DAILY Breaking out of the siloes and into fluid, agile teams will be key for the industry. Ac- centure’s report on Capital Markets Technol- ogy 2022 argues that size and scale of legacy infrastructure is a major challenge for the buy-side. The infrastructure established to support global and fixed-income markets, the report argues, is often oversized and nearly always siloed. Client onboarding The buy-side is edging up the curve, in the realisation that emerging technologies have the power to improve the way asset managers carry out client onboarding. Paul Spencer, chief operating officer at Velocimetrics, argues that the performance of a replacement system run in a test environment is the key to overhauling the stack. “This approach deliv- ers the best possible performance improve- ments while minimising the risk of disruption to trading during the system overhaul.” According to Tom Doris, chief data scientist at Liquidnet, the fundamental problem with overhauling the stack is the existence of “large and monolithic” legacy systems that may not be fit for purpose, but to which it is very hard to make incremental changes. For some buy-side firms, he says, historical M&A may mean that seven or eight different sys- tems could be simultaneously running. The buy-side, Doris says, has become much more open about discussing its systems in recent years. He welcomes the development and relates it to greater sophistication on the buy-side in dealing with solution vendors. “People are now more realistic about the vendor process and are more likely to choose the most coherent bid, rather than the cheap- est.” There is, however, “no silver bullet,” he says. The greater technological complexity involved, has meant that old and new systems now have to be run in parallel for much lon- ger; a year is now not unusual compared with two or three weeks in the past. Even a year, he argues, is still not enough in some cases. Fenergo’s O’Neill views client onboarding as one of the biggest operational challenges that buy-side firms currently face, with automa- tion as the solution. “Through automating client onboarding, asset managers can allevi- ate the pain points associated with a manual onboarding process. The overhauling of the onboarding process doesn’t necessarily cause downtime as asset managers can continue to manually onboard clients until the new system is up and running.” Margin of error Bottom-line financial performance is at stake. Indus Valley Partners, a New York- based provider of buy-side technology solutions, takes the po sition that the rise of outsourcing models means that the ability to govern and catalogue the datasets generated by external providers will become critical on the buy-side. Indus predicts targeted out- sourcing of core buy-side functions including operations, data, treasury, compliance, risk, IT and accounting, driven by cost and head- count pressures. Competition from non-traditional sources is also on the increase. Accenture’s report cites research from Greenwich Associates which found that that one in five government bond investors and one in four interest-rate deriva- tive investors either trade with or plan to use non-bank liquidity providers. These non- bank providers are seen as using technology to offer better pricing and tighter spreads. In that context, the margin of error in a stack overhaul is razor-thin. Medan Gabbay, chief revenue officer at Quod Financial, an AI-driven trading software vendor, argues that “efficient execution and streamlining costs is the most certain way to preserve overall investment per- formance” and can even outweigh investment strategy in determining outcomes. The next step up the curve, Gabbay says, is “to develop trade cost analysis from the tactical ‘tick-in-the-box” compliance product to a pre-trade predictive tool for strategy selection and process automation.” If that vision becomes a reality, then Amara’s plateau of productivity will finally be within reach.