The TRADE predictions series 2023: Technology, part two

Participants from Torstone Technology, FlexTrade Systems, Tradeweb, Broadridge Trading and Connectivity Solutions, Appital and FINBOURNE Technology predict that investments in technology will continue to increase as we enter the new year. 

By Editors

Mark Badyra, chief executive officer at Appital: Asset managers continue to look to technology solutions to remove opacity from their processes and address their key pain points – liquidity discovery and price formation opportunities for illiquid equity positions. This is now more important than ever as we are heading into an economic downturn and buy-side firms are looking to protect investor returns by taking advantage of new liquidity opportunities they have not been able to access before.

Based on our own journey and the traction we have had following the launch of Appital Turquoise Bookbuilder this summer, it is clear that legacy, relationship driven bookbuilding processes are no longer adequate and institutional investors need to be able to gain control over the entire process and proactively drive liquidity. We have witnessed the industry coming together, embracing innovation for equity markets and working collaboratively to essentially create a new buy-side workflow that brought a manual and outdated bookbuilding process into an automated platform. We firmly believe that collaboration to innovate and adopt new technologies across the asset management community will continue at pace and we are delighted to play our part in this journey.

Mack Gill, chief operating officer, Torstone Technology: The events of the past 12 months have reinforced the necessity of modern architecture for market participants. While many expected a potential slowdown in technology adoption as we emerged from the pandemic, it’s clear that banks and brokers remain laser focused on leveraging new technology solutions. More specifically, we expect the benefits of cloud technology to continue to shine throughout 2023, especially in post-trade, as the flexibility and scalability that cloud offers is vital for firms to get their operational ducks in a row ahead of the incoming T+1 settlement cycle. Any firms that rely on legacy technology, or inefficient manual processes, will face extreme difficulty in keeping up with the market. The industry has evolved from seeing modern, automated solutions as a ‘nice to have’ to a core business requirement. Looking forward to 2023, we expect more use of SaaS as firms are keen to simplify and streamline their systems, particularly in the post-trade space.

Andy Mahoney, managing director, EMEA, FlexTrade Systems: As predicted in The TRADE’s 2022 edition, this year has seen the emergence of electronic liquidity providers moving up the food chain into the buy-side trading desktop, allowing users to interact with actionable liquidity directly, be it SI, CRB or MTF. 2023 will see a further advancement to democratise liquidity, where the buy-side, with appropriate technology, can begin to control and automate their interaction with execution avenues previously only available through a sell-side relationship. With direct access to these new liquidity sources, the importance of technology to ingest, aggregate, and analyse this new data alongside traditional sources will be paramount. As the new, democratic liquidity landscape emerges, we will likely see the advent of the buy-side smart order router, which ingests multiple liquidity sources, placing orders on the buy-side’s terms.

Enrico Bruni, head of Europe and Asia, Tradeweb: As we head into 2023, I’m thinking about the key trends that will shape the next generation of electronic trading. I expect to see a real push for more innovation in trading and we see this especially when it comes to automation. There is more demand for intelligent tools that support execution, whether it’s in automating workflows or trade execution, and we expect this trend to continue in 2023, especially as our clients embrace new technology. Another important trend we’ll see more of next year is about connectivity, in a wider sense. The industry is putting greater emphasis on linking markets across asset classes and workflows. Traders should be able to link and trade across different asset classes seamlessly, for example in rates products, executing asset swaps packages (e.g. government bonds vs interest rate swaps). A greater level of interoperability will deliver greater scale in 2023. Finally, we believe there is still a significant opportunity to fill the white spaces within the existing marketplace. There are still markets which have resisted electronification, specifically repo where digitisation in the dealer-to-client space has remained low. As we introduce new solutions to cater for more complex workflows and risk transfer, electronification will become inevitable and a greater number of markets will electronify and come online in the next 12 to 24 months. 

Ray Tierney, president, Broadridge Trading and Connectivity Solutions: The digital transformation journey that capital markets firms are on begins with the integration of digital technology into all areas of a business, fundamentally changing how individuals operate and deliver value to customers. In Broadridge’s recent Next-Gen Technology Adoption Survey, nearly half (49%) of respondents described investing in innovative technologies as important to their company’s strategic transformation. Implementing next-generation technologies brings significant financial and strategic benefits to firms, and we’re only going to see firms accelerate investments in these areas as we head into the new year. We are seeing large volumes of data become more readily available and easily accessible.

This will help to fuel the effectiveness of these new disruptive technologies and will also allow firms to accurately measure how their investments are helping to reduce operating costs. Big data won’t just get bigger, it will get smarter. This transformation requires a cultural change, one that enables organisations to continually challenge the status quo, experiment, and get comfortable with failure. I believe that this is one of the biggest challenges that firms need to overcome in the next 12 months, and it’s positive to see that some traditional players are starting to make that shift. Next year, expect to see the appetite continuing to grow for firms to acquire or partner with technology vendors to enhance their client engagement and experience as they seek to differentiate themselves from their competitors.

Steve Collie, co-founder and co-head of client delivery, FINBOURNE Technology: The pace at which these investment trends are moving, along with the need to deliver on-demand client reporting has equally fuelled the need for scalable, cloud-native solutions that can deliver elasticity. This will necessitate a Modern Financial Data Stack that can deliver firms with a real-time, financial data repository, consolidating and translating multi-asset class transactions, market and reference data, in the public cloud. The industry will also need to explore SaaS capabilities including bitemporality, a critical component when it comes to pricing and measuring risk across the emerging digital asset space, enabling firms and their clients to see their data across two timelines. Bitemporality is essential to delivering an improved risk profile and reduced exposure, offering deeper insights into trading patterns, for future cryptocurrency transactions. As we have seen, cryptocurrencies are not immune to bubble risk, so the ability to manage exposure in real-time is not only a necessity but could also minimise the need to sell-off real assets and cover margins.