In ever-changing market conditions, the sell side is under significant pressure to find revenue growth and cost savings in a time of great uncertainty for existing business models.
Consistency across a bank’s risk, pricing, P&L and positions is crucial to ensure regulatory compliance and to improve transparency and manage risk more effectively.
The drive for revenue growth and a competitive advantage has seen a growing need for sophisticated solutions for proactive position management and a more efficient trader experience to aid faster and more accurate decisions.
A bank needs to have consistency in valuation, market data consumption and simulation and hedging, otherwise it will be basing its hedging strategy on inconsistent market data and figures coming from different pricing mechanisms and curves.
In emerging market countries, banks are looking to replace their manual or spreadsheet solutions with one single automated system for front to back office.
The champions of several emerging market countries as well as the major banks in developed markets use more than one front office system as part of their best of breed strategy and to respond to the need of complex trading structures from their customers or within the interbank trading activity.
The consolidation of the risk figures, P&L, positions and analytics within a single aggregated view across several front office systems becomes vital as it allows the bank to have a single coherent view of their business from a front office trading perspective.
This view can then be illustrated as an example for compliance and risk management as well; the need to monitor adherence to policies, procedures and institutional profiles across all types of risk – credit, market, liquidity and operational - is a must have in today’s volatile market environment.
Since no single software solution can cover an entire investment bank’s needs at best of breed level, a plethora of sophisticated tools and specialist systems have emerged to address different aspects of the process. Many banks have made a huge investment in trading, back-office and treasury solutions; systems that are deeply integrated into the IT infrastructure.
Often, individual product areas are running their own front-office systems with separate technology platforms and data structures. These systems tend to be silo’d, leading to disjointed workflows and making it difficult to get a coherent and comprehensive business-wide view of positions, pricing or risk.
This can also be a very expensive way of supporting the business, involving the duplication of information and work-around systems. More importantly it makes it difficult for the bank to adapt quickly to market change and seize new business opportunities.
The most efficient, cost-effective and flexible system is one which takes a ‘leave and leverage’ approach, rather than ‘rip and replace’, where banks don’t need to replace their existing software, rather they can overlay a sophisticated umbrella platform which can bridge their systems and departments.
This new approach only recently available on the market means that projects will deliver business value in months, rather than years.
The software works independently across systems and data sources, replacing the previously segregated layers and silos that catered for different asset classes.
This means that heads of businesses and desks benefit from a consistent, business-wide aggregated view of global positions, risk, P&L and compliance across all banks’ trading systems with easy access to consolidated information, delivered through a global dashboard, in real-time, enabling them to take action more quickly and make a better informed position.
Banks are provided with a common technology stack that supports the integration of solutions from any vendor. This approach solves the ‘best-of-breed’ dilemma that prevails in many banks and de-risks the bank’s longer term IT strategy and technology roadmap.
The views expressed in this column are the author's own and do not necessarily reflect this publication's view, and this article is not edited by Asian Banking & Finance. The author was not remunerated for this article.
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Based in Singapore since 2005, Alexandru leads the Misys’ APAC Solution Consulting team. In this role, he works extensively with the customers and sales teams in Asia Pacific to ensure robust and extensible product offerings.