Like it or not, the way of working for most tier two and tier three investment firms will be changing due to the raft of regulations that have gone into effect as well as significant modifications and enhancements that are being discussed.
These include the European Market Infrastructure Regulations (EMIR) and Dodd-Frank Wall Street which require high levels of automation in order to comply.
For example, EMIR states that all standardised OTC derivative contracts should be traded on exchanges or electronic trading platforms, where appropriate, and cleared through central counterparties.
Trading platforms are required to be increasingly sophisticated beasts in order to accommodate the vast amounts of trading data that they handle on a daily basis.
Many smaller firms who are currently running their businesses on spread sheets will therefore have to review how they operate. For most, a technology upgrade will need to be considered if they are to stand a chance of meeting the demands of the regulations. However, the requirements of a new system will make it complex to install, which in turn requires huge upfront investment both in time and money – both expensive overheads for a smaller firm.
However, as smaller tier banks and brokers face difficult decisions over costs and compliance, a new technology is emerging that, in the process of helping them with the regulatory changes, also allows them to compete more equally with the big boys.
Platform as a Service (PaaS) means that investors don’t need to worry about storage capacity, computing capacity and technology support.
PaaS provides organisations with access to technology platforms remotely, in the cloud, without having to purchase, install or maintain the technology themselves.
The PaaS approach brings the benefits of the platforms, such as improved automation and greater accuracy of real time data, at a much lower cost than if the firms had to purchase and manage their own systems.
PaaS removes the headache of having to upgrade the systems overtime as this is handled by the PaaS provider.
Additionally, the investment house can easily scale up or down how it uses the platform in line with changing business requirements. Initially organisations only need to purchase the computing capacity to meet their current requirements but, as the business grows, they can expand their technology when they need to and as budgets allow.
PaaS can provide smaller firms with access to the same trading platforms, albeit on a smaller scale, to their larger competitors. In doing so, these tier two and three firms can become more efficient, accurate and competitive than if they continued to operate on spread sheets.
But the changes facing investment firms don’t stop at compliance and competitiveness. Increasingly, impressive mobile devices like tablets and smartphones are finding their way into the workplace.
Bankers and brokers are, like everyone, also swept up in this wave of ‘consumerisation’.
It’s not hard to spot the difference between the slickness of a personal mobile device, which makes light work of syncing documents – regardless of their location – so that users have the information they need at the tip of their finger, and the clunky, awkward and slow systems that are still so prevalent in many enterprise workplaces.
While cloud computing is not fairy dust that will magically transform one into the other, it is a key piece of the puzzle that will help bring the benefits of consumer technology into the work environment.
Cloud computing is not without issues of course. Understandably, connecting to somewhere outside the corporate network raises security concerns, for example. However we’re not talking about a new technology. Countless organisations, both large and small, already hold their critical data off-site in the cloud, and have done so successfully for several years.
There are a raft of systems in place – such as two factor authentication, SSL encryption, client certificates, RSA tokens and the like – to protect against any security breach.
Additionally, the success of today’s PaaS providers depends on their ability to keep their clients’ information secure. As such, they may even place a greater emphasis on security than some in-house teams.
Working with providers who understand the issues around data input, reconciliations and settlements, back office reporting and risk management analytics – all day to day activities for any investment firm – will help bring an added level of reassurance.
Even for those firms with their own IT department, the PaaS approach still has advantages. Developing any platform in house still puts immense pressure on manpower resources as they get to grips with a new complex platform. With any form of downtime unacceptable, there’s no room for error caused by ‘learning on the job’.
Thanks to the PaaS model, there’ll be less administration and technology burden, leaving managers free to do what they are best at – making sound investments whilst knowing that the rest of the business is being looked after.
For more information, please contact Jillian Alexander, Tel: 079 49 602 484 / [email protected]