About a-team Marketing Services
The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Hedging your bets…

Subscribe to our newsletter

Hats off to analyst Aite Group this month for breathing new life into one of our favourite topics – STP. In its report on Capital Markets IT Spending Priorities in 2007, Aite identifies “a renewed emphasis on trade processing” and, while it does so with a degree of embarrassment, the message is clear. “While STP may create rolling eyes and visions of over-used acronyms, CIOs are absolutely focused on improving order flow,” it writes. “Settlement, trade processing and systems integration account for three of the four top systems priorities this year.”

There is plenty of good news for enterprise data management (EDM) proponents in the Aite report, as there is in much of the slew of research unleashed on the marketplace in recent weeks and explored in this issue. Another interesting nugget in the Aite report though is that hedge funds – long thought to be supremely uninterested in anything that happens post-trade – are also predominantly focusing on trade processing efficiencies this year.

The positioning of the hedge fund community in regard to the pertinent issues of the day is an interesting mix of leading and following, it seems. Because they are at the forefront of the derivatives business, their experience in dealing with the operational challenges faced in that world is often held up as an example to other more traditional buy sides seeking to get into the space (as it was at a recent London conference on derivatives operations). Indeed, it is in pursuit of the kinds of successes achieved by the hedge funds that long only managers are rounding on the derivatives space, and helping to push the combined notional value of derivatives through the $500 trillion mark next year, says analyst Celent.

Even when it comes to negative attributes – such as investor risk – hedge funds manage to take a leadership role, as is demonstrated by the fact that the principles for valuing hedge funds cooked up by IOSCO will have a knock on effect on the rest of the industry, with best practice for hedge funds likely to be accepted as best practice per se.

However, hedge funds also have a certain operational vulnerability. As the Aite Group report says: “Building power outages, key personnel stuck in traffic, server failures and other issues that seem minor to large sell side firms can mean substantial disruptions to buy side firms.”

And, as one hedge fund representative speaking at the London derivatives conference said, it is difficult for hedge funds, because of their size, to influence service providers and vendors sufficiently to get their particular requirements catered for – hence an initiative among a group of hedge funds to band together to stamp their mark on valuation and portfolio reconciliation practices.

One group of vendors that is getting quite energised by the prospect of a whole new marketplace to address in the shape of the hedge fund community is the data vendors. As Reference Data Review went to press, Paladyne Systems – provider of ASP solutions for hedge funds, including reference data management systems (Reference Data Review, May 2007) – was trumpeting the bringing on board of another data vendor partner, Interactive Data, bolstering its existing partnerships with Reuters and S&P and reflecting, it says, hedge funds’ increasing interest in working with market data vendors and a move away from Bloomberg’s dominance in this area. For its part, Interactive Data says “it is exciting to see that hedge funds and the technology vendors that support them are increasingly recognising the importance of high quality reference data within their operations”. Exciting indeed.

Subscribe to our newsletter

Related content

WEBINAR

Upcoming Webinar: New trends and technologies influencing post-trade digitalisation

Date: 27 September 2022 Time: 10:00am ET / 3:00pm London / 4:00pm CET Duration: 50 minutes While digital transformation of front-office functions at financial institutions is well underway, the back office is lagging, calling on firms to reassess and innovate post-trade processes. The need for change is highlighted by specific issues, including the move towards...

BLOG

The Challenges and Opportunities of Data Fabric – an Expert Opinion

Data fabric offers the opportunity to scale data management while sustaining flexibility and agility. It also supports the creation of data products in under a day rather than in three months – but as in so many data management scenarios, the outcomes of implementing data fabric depend on the input quality of the data. An...

EVENT

Virtual Data Management Summit London (Redirected)

Now in its 8th year, the Data Management Summit (DMS) in London explores the shift to the new world where data is redefining the operating model and firms are seeking to unlock value via data transformation projects for enterprise gain and competitive edge.

GUIDE

ESG Data Handbook 2022

The ESG landscape is changing faster than anyone could have imagined even five years ago. With tens of trillions of dollars expected to have been committed to sustainable assets by the end of the decade, it’s never been more important for financial institutions of all sizes to stay abreast of changes in the ESG data...