From a flurry of new regulations and rapid changes in market structure to constant updates from exchanges, simple, flexible infrastructure has never been more important in the trading world. John Lothian News spoke with Dan Hubscher of Object Trading on the topic of shedding operational complexity and what they found from their most recent research.
“The problem is,” according to Hubscher, “that people are stuck in silos – all the trading applications, infrastructure and connectivity come packaged with the screens. Every time there is an innovation or change at the exchange level, there is a ripple effect all the way through the bank.” Multiply this problem across several exchanges and hundreds or thousands of clients, and it is easy to see why banks and brokers are having a difficult time getting an accurate, aggregate real-time view of risk.
What’s more, the regulatory environment is in constant flux, with inconsistencies and timing gaps across jurisdictions.
Object Trading, a London-based provider of direct access to both the buy- and sell-sides, conducted a study in late 2013 on market access and pre-trade risk management. What the company found was a universal desire for more simplicity but, are faced instead with a world where each new twist and turn creates more complexity. While many of the associated risks occur on the front-end – credit issues, order routing and trade errors – the first true risk assessment is only available in the post-trade environment.
Hubscher says the first steps involve standardizing the data on the back end, and decoupling order generation from market access infrastructure. “The flexibility,” he says, “comes from handing the client one market interface, normalized across markets. Then take that brain power that was dealing with all the complexity and turn it toward offering new services for clients.”