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.
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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.