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Technology / AI and automation

New Laws of the Land: Hunting for Value in Post-Trade Services

In the face of tighter economic and regulatory conditions, post-trade professionals face greater pressure to keep one eye on growth, and the other on a swath of ensuing technological and competitive developments.

Nino Ciganovic, Management Committee, Securities & Exchanges, SIX

Research SIX (Switzerland’s principle stock exchange) conducted earlier this year validated these challenges: 67 percent of industry executives believe that if the post-trade function is to continue creating value beyond being “simply operational”, they must build new services and revenue opportunities by 2027.

The post-trade function is familiar to innovating its way out of issues. However, the difference today is innovative technologies become tomorrow’s commodities much quicker. This results in a continuous hunt to find value, a factor compounded by a lack of understanding around just how important post-trade services are to the securities value chain. The following information, however, provides an overview of where the value lies in this function, and where the opportunities exist.

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Previously, correspondent and transaction banking models have served the industry well. However, with increasingly demanding clients and heavier oversight from regulators, cracks are appearing in these models.

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Innovation can solve many of these challenges; survey respondents agree – 63% highlighted that Robotic Process Automation (RPA) and Artificial Intelligence (AI) are technologies that have a strong potential to overcome the aforementioned challenges. Examples of it are already starting to make headlines in the industry press, however the news is focused on the trading and execution side rather than post-trade services.

Fintechs as Friends

When it comes to meeting change with speed, fintechs really have the edge over traditional players. Our research reveals collaboration with fintechs presents another large opportunity in the post-trade space, with over a third of respondents (37%) suggesting their organizations are highly likely to turn to “the new kids on the block” for at least one post-trade service by 2027.

The strategic importance of fintech investment is not being overlooked, with many large financial institutions beginning to make acquisition or partnership plays over smaller, more innovative businesses. By partnering with fintechs, traditional post-trade businesses will be able to react to client needs faster and approach challenges from a fresh perspective without the burden of legacy systems and culture.

Balance is Key

43% of respondents said that collaboration with fintechs was essential to remaining at the forefront of the industry. But hiring the right talent was also classed as another critical aspect. More than half said they needed to hire from a fresher pool of talent in order to create new and more innovative opportunities.

It is not only collaboration with fintechs that are changing the makeup of firms – a recent report from EY suggested that future talent could be internal entrepreneurs as opposed to those who excel at in-house developments. This is likely to have an implication for talent acquisition at all levels meaning that some companies need to begin re-assessing the value of internal employees as well as those externally.

A Fundamental Shift

It is a challenging time for the post-trade function right now. However, with innovations such as RPA and AI becoming better recognized and understood in the industry, the landscape is looking much more reassured. Despite this, it is important for the industry to remember that technology alone is not enough to achieve sustained progress. A fundamental shift in skills and an attitude towards collaboration is needed to do this.

This article is from the CBROnline archive: some formatting and images may not be present.

CBR Staff Writer

CBR Online legacy content.