Speed is everything in capital markets. Success in the front and back office is dependent on the ability to provide accurate, fast responses to challenging questions. Over the past several decades, there has been a tremendous increase in the amount of information available to market participants, and trade transactions are now being carried out at a very rapid pace. In parallel, the technology which capital markets firms are developing is becoming increasingly complex. Especially as firms migrate workloads to the cloud and rely on more distributed architectures. Many business leaders need to ask themselves the burning question - how will this impact our ability to win in an increasingly competitive, democratized trading environment?
Luckily, by delivering the right tools to enable their teams to consume, track, secure, manage, and enrich data sets, firms can set themselves up for success and take even more significant advantage of the opportunities available to them with digital and cloud transformation. Here are a few examples of how leaders in capital markets are leveraging data to improve IT efficiency, empower lines of business, and create a culture of risk excellence.
Driving end to end trade performance and execution
Having access to cutting-edge technology and systems is a differentiator. It's why the best analysts, traders, software engineers, and strategists come to your firm and why clients choose to use your services. However, the advantages gained through real-time trading or market research platforms decline rapidly when networks, services, applications, and infrastructure are not performing up to par. That's why it's critical to have complete visibility over these components. For example, in trade tracking, seeing the entire trade lifecycle from execution to booking and settlement and how the interconnected systems manage this process is vital to all parties working the transaction.
IT and application telemetry data (metrics, logs, and traces) are essential, with the ability to observe and monitor performance of your distributed systems. By combining these telemetry data points with business data oriented around the front office — such as trader/portfolio manager names, desk, financial instrument, spot price, settlement date, region, currency, and other elements — you can better understand business impact. This additional observability metadata enables any performance issues (or improvements) to be translated to business value; and ultimately attribute corresponding gains or losses back to clients and the business.
When something goes wrong, clients want answers fast. Therefore, those on the front lines (traders, service, account reps) must have ultimate visibility when technical issues may impact clients. For example, when there is latency or underperforming services, which deals, assets, and clients are affected? Customizable dashboards can link the technical and business worlds to produce a holistic vision from the back to front office.
Société Générale puts this theory into practice for their corporate and investment bank. Leveraging Elastic, they integrate data across the entire application chain, monitor that data, spot latencies, and automatically alert specific trading desks to the exact trades and clients that could be affected.
Making risk mitigation a competitive advantage
The next several years will see a hotbed of global regulatory activity within capital markets. The democratization of retail trading, acceleration of crypto activity, focus on ESG/CSR, and continued emphasis on cybersecurity are just a few drivers for future legislation. Additionally, as digital transformation and retail engagement accelerates in capital markets, over-automation is one of the most considerable risks to firms. As stated by a recent Deloitte study, a recurring theme from regulators’ speeches and white papers is the importance of human oversight and intervention in the space, especially when it comes to AI-driven models. Thus, firms should expect to see new requirements associated with the activity and the models that they rely upon.
Data consumption, collection, and governance are at the core of these new or expected policy changes. Whether you monitor transactions for adherence to trade settlement requirements, standardize processes to comply with audit requirements (for example, CAT), consolidate risk positions across asset classes, or investigate logs to mitigate potential security risk, it all comes back to data tools and infrastructure. Enriching IT or business data across time and formats (structured or unstructured) is critical, and leveraging the power of your intelligence to accelerate risk mitigation is a must– thus making your ability to protect clients and their reputation a crucial advantage in your business.
There are many documented use cases where clients leverage Elastic to improve processes involving regulation compliance or risk management. For example, the Canadian Imperial Bank of Commerce (CIBC) designed and implemented a timeliness monitoring solution using Elastic. Considering the strict submission requirements, the many applications involved, and the ever-growing amount of data processed, this task is not trivial and requires rigorous monitoring - but this was not a problem once Elastic was brought on board.
Capturing additional value in the cloud with Elastic
A recent study by Coalition Greenwich and Google Cloud showed a dramatic adoption of cloud-based services across the trading and investing lifecycle. Both buy-side and sell-side firms are rapid adopters of cloud technologies and overwhelmingly intend to consume more in the future. Investment banks are leveraging cloud technologies, primarily for analytics related to their trading businesses. At the same time, buy-side firms are focused on cloud services for functions such as portfolio management, trade order management, and real-time market data. In fact, according to the study, 44% of large buy-side firms and 55% of the sell-side are using AI/ML in the cloud today. Additionally, 68% of sell-side and buy-side users find it critical for market-data providers to offer public cloud-based services, a growing trend backed by the increased comfort level and acknowledgment of the advantages of public cloud services across financial services.
As capital markets firms migrate to the cloud, managed services like Elastic Cloud, help back and front office professionals search, observe, and protect their data across their hybrid or multi-cloud environment. Quickly deploy critical monitoring and search tools and improve the speed to market for new trading platforms, supporting applications, and services. Automatically scale resource capacity, such as data and machine learning nodes, to keep your team moving through periods of high trading volume. Then bring all of your data together within a single view to search and visualize.
Learn more about how financial institutions turn data into a strategic asset with Elastic.