From the Top: Building a Modern Technology Platform for Today’s Markets
This year, TT celebrates 30 years in business. Coincidentally, I also started my career 30 years ago.
During that time, both TT and I have focused on building products that solve the needs and business problems of the capital markets. But the underlying architecture that supports those markets is becoming increasingly aged, making it more difficult and more costly to meet today’s needs and solve today’s problems.
Every year, vendors, buy-sides, sell-sides and venues expend an enormous amount of effort and money developing and maintaining applications and architectures as they innovate and keep up with the pace of regulatory change.
Fundamental changes to market structure are driving the trade lifecycle to become more compacted, with the time from execution to clearing rapidly reducing. The settlement cycle is shortening, trade reporting timelines are tightening, real-time risk and margin requirements are increasing, and the demand for access to real-time data is insatiable. In addition, the continued march towards digitization and automation will see more asset classes becoming electronic, which will continue to drive volatility and higher trading volumes
All of these changes are increasing the strain on the underlying architecture – requiring applications to provide higher performance and throughput, while also demanding higher levels of stability and resilience. For many firms, the ability to stay up to date with their technology is becoming more challenging. And while the industry has done relatively well in meeting the challenge, the incremental fixes to this aged architecture are ultimately not sustainable.
However, technology modernization is a tricky proposition. Proving the ROI of large-scale, multi-year modernization programs has proven to be difficult, and through my career, I have witnessed inertia around change driven by that uncertainty. In many instances, firms are forced to live with decades-old solutions, written in legacy languages, wrapped in more modern messaging layers, to give the appearance of a modern application without solving the issues that lie beneath.
A number of years ago, TT took the hard decision to modernize our core platform. Adopting a cloud-native, component-based and services-oriented architecture, which provides the elasticity of the public cloud, while allowing for colocated solutions when higher performance is required. This decision allows us to take full advantage of the cloud service providers’ innovation and investment, while also enabling us to more readily incorporate modern technologies into the platform.
Over the coming years, I predict that the financial services industry will increasingly take the same approach, allowing for much higher levels of interoperability, and positioning us all to meet the market structure demands of the future.
Building true multi-asset and global functionality
One of the other key themes that has developed out of the last few decades has been a recognition that the fragmented and disparate approach to supporting different asset classes and different regions needs to be resolved.
While there were very good reasons why the first generation of trading and post-trade platforms were focused on specific asset classes or geographies, the fact is that the downside impacts of supporting multiple duplicative solutions are too great to ignore. The costs are too high, managing risk and capital is too difficult, and extracting meaningful insights from data is too complex.
So as the industry modernizes the underlying architecture, it is important that the next generation of solutions, for both the buy and sell sides, are agnostic to asset class and jurisdiction.
Of course there are many valid concerns over building global multi-asset class solutions, given that these solutions must offer the specificity of trading needed for each asset class, and support the unique requirements of each jurisdiction. These concerns seem all the more well founded when one views the spaghetti-like chaos that arises from wrapping multiple legacy single-asset solutions to give the appearance of multi-asset functionality.
At TT we start with the user, and we analyze how that user is interacting with different asset classes in different jurisdictions, before we determine how the technology can enable that user to be more efficient and achieve better outcomes. We also recognize that while trading is not an endless universe of permutations, with trader behavior often being repeatable, regardless of the asset class, there are nuances and specifics that must be captured to allow the user to perform their role effectively.
Experts in capital markets solutions
At TT, I am surrounded by experts who are building a truly global, multi-asset platform, using modern component-based architectures, to provide solutions that are tailored to the next generation of users. We are incredibly excited about the future of capital markets technology and look forward to sharing our progress and a multitude of other thoughts and topics on this blog.