Measuring success through data
21-22 November 2016
Nickolas Delikaris of State Street discusses balance sheet and regulatory woes, and the need for efficient data analytics in securities lending
Image: Shutterstock
In the past eight years of regulatory reform, and resulting changes in balance sheet strategies the securities lending market has seen significant changes. Gone are the days when transactions had minimal impact on the balance sheet and when revenue growth had no restrictions beyond size of balances and spreads. Regulation has made everything significantly more complex but also more transparent and increasingly collaborative.
This is evident in the amount of time market participants spend deciding how to allocate business (and balance sheet) across counterparties. Understanding the nuances and needs of your trading partners allows for continued business and access to financing that would otherwise be curtailed. While all of these changes create issues around optimisation鈥搕echnological advances have been keeping pace.
Here are some highlights of what has changed in the last few years from a technology perspective:
鈥� Hardware and computational power from both a speed (central processing units to graphic processing units) and cost (cloud, distributed) standpoint have significantly improved.
鈥� The internet of things now offers an abundance and new types of data.
鈥� Algorithmic and statistical methods have both been refined and enhanced.
These technological developments鈥攃ombined with regulatory reform鈥攃reate opportunities to automate trading processes that incorporate balance sheet and liquidity parameters.
That type of complexity in the decision process requires both a real-time, point-of-transaction decision鈥攁s well as the ability to optimise portfolios in a way that minimises cost and capital while maximising growth and revenue. It鈥檚 only through automation that these platforms can achieve scalable growth and fully optimise the business鈥檚 finite balance sheet.
As technology shifts from waterfall to agile to become more business-friendly, core decision makers must become more technically literate. A team that can communicate on both business topics and technical concepts is essential for quick prototyping of business-critical solutions.
Said differently, technology is the catalyst to a talent transformation. Emerging technologies such as blockchain, peer-to-peer lending and alternative data are drastically changing the normal course of business. Leaders can no longer afford to only understand these concepts tangentially.
Client interactions and product solutions have transformed from traditional business topics to ones that involve collaborations that are often highly technical. Subjects such as artificial intelligence, machine learning, natural language processing and cognitive computing are all becoming part of the core business vernacular with clients.
These themes do not create well-defined areas and just as we, as service providers, have to adapt to become more flexible with technology, client roles are similarly being altered. The chief investment officer and chief technology/information officers鈥� roles are beginning to blend as investment strategies shift. Clients frequently talk about the need for data scientists and alternative data as a way to capture alpha. This shift has broad implications for trading, operations and research, and requires a new way to interact.
Enhanced custody鈥檚 growth is a microcosm of State Street鈥檚 own technology transformation with its building blocks of success being innovation, collaboration and automation. With technology changing at light speed and its clear impact on the business, no one group can be an expert in every area. Collaboration and partnerships are the only way to navigate this environment. The new normal is leveraging other areas of the firm such as Global Exchange, State Street Associates and the emerging technology centre to help bridge the knowledge gap and create thoughtful solutions.
Fintech is disrupting our market and for the best. These disruptions are creating opportunities to excel, forcing new perspectives, and reimagining a better market structure. Technology not only helps make optimal decisions, but also forces people to transition to more creative roles that ultimately service the client better. More simply, automation reduces the cost to the client and talent transformation increases the service level. Both are necessary to keep pace in this new market ecosystem and create a top-notch platform.
This is evident in the amount of time market participants spend deciding how to allocate business (and balance sheet) across counterparties. Understanding the nuances and needs of your trading partners allows for continued business and access to financing that would otherwise be curtailed. While all of these changes create issues around optimisation鈥搕echnological advances have been keeping pace.
Here are some highlights of what has changed in the last few years from a technology perspective:
鈥� Hardware and computational power from both a speed (central processing units to graphic processing units) and cost (cloud, distributed) standpoint have significantly improved.
鈥� The internet of things now offers an abundance and new types of data.
鈥� Algorithmic and statistical methods have both been refined and enhanced.
These technological developments鈥攃ombined with regulatory reform鈥攃reate opportunities to automate trading processes that incorporate balance sheet and liquidity parameters.
That type of complexity in the decision process requires both a real-time, point-of-transaction decision鈥攁s well as the ability to optimise portfolios in a way that minimises cost and capital while maximising growth and revenue. It鈥檚 only through automation that these platforms can achieve scalable growth and fully optimise the business鈥檚 finite balance sheet.
As technology shifts from waterfall to agile to become more business-friendly, core decision makers must become more technically literate. A team that can communicate on both business topics and technical concepts is essential for quick prototyping of business-critical solutions.
Said differently, technology is the catalyst to a talent transformation. Emerging technologies such as blockchain, peer-to-peer lending and alternative data are drastically changing the normal course of business. Leaders can no longer afford to only understand these concepts tangentially.
Client interactions and product solutions have transformed from traditional business topics to ones that involve collaborations that are often highly technical. Subjects such as artificial intelligence, machine learning, natural language processing and cognitive computing are all becoming part of the core business vernacular with clients.
These themes do not create well-defined areas and just as we, as service providers, have to adapt to become more flexible with technology, client roles are similarly being altered. The chief investment officer and chief technology/information officers鈥� roles are beginning to blend as investment strategies shift. Clients frequently talk about the need for data scientists and alternative data as a way to capture alpha. This shift has broad implications for trading, operations and research, and requires a new way to interact.
Enhanced custody鈥檚 growth is a microcosm of State Street鈥檚 own technology transformation with its building blocks of success being innovation, collaboration and automation. With technology changing at light speed and its clear impact on the business, no one group can be an expert in every area. Collaboration and partnerships are the only way to navigate this environment. The new normal is leveraging other areas of the firm such as Global Exchange, State Street Associates and the emerging technology centre to help bridge the knowledge gap and create thoughtful solutions.
Fintech is disrupting our market and for the best. These disruptions are creating opportunities to excel, forcing new perspectives, and reimagining a better market structure. Technology not only helps make optimal decisions, but also forces people to transition to more creative roles that ultimately service the client better. More simply, automation reduces the cost to the client and talent transformation increases the service level. Both are necessary to keep pace in this new market ecosystem and create a top-notch platform.
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