The heat is on

Tough times lie ahead for the market, but technology and better management of data will continue to be valuable differentiators, delegates to this year’s Securities Industry and Financial Markets Association (Sifma) Technology Management Conference were told. Although the securities industry has recently experienced billion dollar write-downs, serious reductions in headcount and widespread cost cutting, firms’ technology spend has not been significantly affected, according to research by IBM and Sifma that was presented to the delegation in NYC.

The research was based on a survey that was conducted to better understand the priorities for future IT spending, given current market conditions. Accordingly, the 500 IT professionals within the financial markets industry that responded to the survey were asked to contrast their IT budgets from 2007 to 2008. One third suggested that their 2008 budgets had increased and that sentiment was reiterated when asked about IT budgets for 2009. “Although the majority of survey respondents believed the sub-prime crisis was caused by factors unrelated to technology, this crisis is serving as a catalyst to increase the amount of money invested in technology and risk management initiatives,” says Randy Snook, senior managing director and executive vice president of Sifma. “At our member firms, people are being asked to do more with less and rely more heavily on technology. The anticipated technology investments are one of several important building blocks necessary to mitigate the financial impact of future disruptions.” The results of the IBM and Sifma report indicate that most Wall Street firms are currently engaged in, or are planning, significant implementation activity around improving their IT infrastructure, including improving data quality and automation. Good news for those exhibiting then. Transparency is also a key motivating factor in the market, added keynote speaker at the conference, business strategist and co-author of infamous business tome Wikinomics, Don Tapscott. In a competitive world and to restore confidence in the marketplace, the US will quickly need to establish unprecedented levels of transparency among marketplace buyers and sellers, he said. Tapscott pointed to aggregate data as a fundamental building block to help all market participants assess systematic risk, especially with regards to complex instruments. “In the age of Wikinomics – or true mass collaboration as an economic force – we don’t need another round of onerous Sarbanes-Oxley style provisions. Rather, new avenues for transparent collaboration between market participants would be far more robust than hiring more oversight bureaucrats,” Tapscott explained. However, building a better data infrastructure will not be an easy task to achieve, Sifma delegates were told numerous times. The panel for the closing session, for example, discussed the practicalities of tackling infrastructure in an environment of fast-paced change as a result of ongoing electronic trading developments and regulatory challenges. To this end, capacity and latency issues were popular topics (both on the exhibition floor and during the conference sessions) and these issues go way beyond the front office, the closing panel agreed. The impact of trade volumes on infrastructure extends through trade processing and back office reporting, and regulation is exacerbating the problem because more rules are creating increased data volumes. These concerns were reflected in the exhibition hall, vendors referring to scale and flexibility as part and parcel of their solutions. This issue of Reference Data Review provides the lowdown of these new releases and the hot issues from the conference.