The Wind of Change
Asset managers are facing a stark choice between technology investment or obsolescence.
Degrees of this theory are beginning to become apparent on the buy side, driven by dual winds of change. On one side, regulation and the actions of watchdogs are forcing an element of evolution. Meanwhile, technology is buffeting the buy side from the other end, leading to a more natural form of speciation among those that can leverage advances in technology and those that cannot.
The UK’s Financial Conduct Authority played a big role in this over the past few weeks, first with its scathing assessment of flaws in the UK’s asset management industry, and second by firming up its implementation objectives for the review of the Markets in Financial Instruments Directive (Mifid II).
On Mifid II, the research question has been tossed back and forth for years, on both sides of the Atlantic. Every day seems to bring a new survey on how many buy-side firms are woefully prepared for January 3, 2018, when the rules take effect, while vendors are releasing their ready-made solutions at a breakneck pace.
What remains striking, though, is how these dual currents of change are complementing each other. On unbundling, managing research payment accounts at such a granular level will, of course, require an element of technology to accomplish, while regulations have already blurred the line between the legislative and technical processes. Mifid II, after all, was delayed by a year for the precise reason that the technology base required to comply didn’t have a hope of being ready in time.
When it comes to managing the improvements that the FCA wants to see from UK asset managers, too, a healthy dose of technology will be required to manage enhanced transparency and disclosure requirements, along with addressing concerns around client communications and calculating performance. WatersTechnology has been reporting in recent weeks that performance measurement has elevated the middle office to a crucial role in many firms—this will not halt that ascent in any way.
How firms adapt and grow with these requirements depends much on their attitude toward the two pillars of change, and whether they see them as a caduceus or an ouroboros—two intertwining strands of change, or a cycle that eventually eats itself.
Those that are able to use technology in an efficient way, and develop as an organization, are the ones who can benefit from speciation. For others, well, that’s where natural selection comes into play.
This week on Buy-Side Technology:
- Remember bring-your-own-device, and all of the hand-wringing about iPhones potentially destroying finance as we know it? Oh, how we laughed. Good news, as my colleague Emilia David reports today, it hasn’t gone away. In fact, it’s gotten far worse.
- Bitcoin swap execution facility LedgerX gained full approval from US regulators this week, but it’s still waiting on the nod for its clearinghouse. I’m reliably informed by people familiar with the situation that it’s being looked at, but it’s a bit like starting a marathon with a dead leg at present.
- After reading this profile of Cheyne Capital’s Josh Jacobson, I’m wondering whether watching a former editor fling a coffee cup into the newsroom wall inspired me to examine journalism at a fundamentally psychological level. I suspect it prompted me to file my copy faster.
- Michael McGovern has been appointed to lead Brown Brothers Harriman’s fintech business and I don’t even know what a bank is anymore. Is it technology, is it a vendor? Will the day come where we walk in to get a mortgage and walk out with a five percent stake in a disruptive payments company?
- Anthony and I didn’t have a guest on this week’s podcast, but if you want to hear a Brit criticizing the major league system in American sports, and the irrational disregard for promotion or relegation in favor of investor protection, then this is your jam.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
Bloomberg, industry bodies push back on Cboe’s proposed OEMS rule change
Some industry bodies disagree with the options exchange’s proposal to carve its Silexx OEMS out of the SEC’s definition of an exchange facility and place it into a separate business line.
Zeros and ones: Industry contemplates T+0 as the next step
With the North American transition to T+1 settlement complete, same-day settlement could be the next goalpost set, though skeptics are many.
The IMD Wrap: Déjà vu as exchange data industry weighs its options
Max highlights some of WatersTechnology’s recent reporting on data costs and capacity issues facing the options industry, and asks, haven’t we seen this before somewhere?
FRTB data quality issues persist amid shifting implementation dates
Banks are finding market and reference data challenges posed by the FRTB’s standardized model tricky, compounded by uncertainty over when the regulation will take effect.
Cboe pushes rule change to make way for proprietary Opra alternatives
As US options data has grown in volume and cost, Cboe says changing the public feed's governing document would make way for more competition from private alternatives, including its Cboe One Options Feed, launched in 2023.
Regulators urged to promote cyber security investment
Public interest in stopping cyber attacks that could trigger bank runs, says Bundesbank researcher
Hong Kong looks for digital response to trade reporting burden
New swaps reporting framework will include more fields than requirements in US or Singapore.
Big questions remain over Dora’s critical third parties
Industry looks for clarity on critical third parties ahead of July 17 regulatory technical standards for the EU’s Digital Operational Resilience Act.