Robo-Advisors on the Rise in

trading technologies for fi nancial-market professionals PUBLIC CLOUD WARS

Shining a Light on Shadow IT

EMBRACING CHANGE

Ian Thompson marries technology and operations at Fidelity International

waterstechnology.com April 2017 Lightning Fast

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 Supports Intel® Xeon® processor E5-2600 v4/v3 product families  Over 60 SKUs Enabled  Optimized Hot-Swap NVMe Designs  Highest Quality  The Leader in NVMe Server Development 03_Q3_SM_USP_121416_MasterFile_AllFlashNVMe_Pg2 Learn More at www.supermicro.com Intel Inside®. Powerful Productivity Outside. ©Super Micro Computer, Inc. Specifications subject to change without notice. Intel, the Intel logo, Xeon, and Xeon Inside are trademarks or registered trademarks of Intel Corporation in the U.S. and/or other countries. Editor-in-Chief Victor Anderson [email protected] tel: +44 (0) 20 7316 9090 US Editor Anthony Malakian [email protected] Deputy Editor, Sell Side Dan DeFrancesco [email protected] Deputy Editor, Buy Side John Brazier [email protected] European Staff Writer Aggelos Andreou [email protected] US Staff Writer Emilia David [email protected] Asia Staff Reporter Wei-Shen Wong [email protected] Head of Editorial Operations Elina Patler [email protected] Contributor Max Bowie, Editor, Inside Market Data

Commercial Director Colin Minnihan tel: +1 646 755 7253 [email protected] Commercial Manager Phil Ansley tel: +44 (0)20 7316 9643 [email protected] Headlines and Deadlines Business Development Manager Tom Riley tel: +44 (0)20 7316 9780 [email protected] Business Development Manager Michael Balzano tel: +1 646 755 7255 [email protected] Deadlines are strange things and people, it seems, are simi- Marketing Manager Louise Sheppey tel: +44 (0)20 7316 9476 [email protected] larly strange when relating to them. British poet and essayist Samuel Johnson once Design Lisa Ling famously commented that, “When a man knows he is to be hanged ... it concentrates Corporate and Single Subscriptions his mind wonderfully.” Johnson, fortuitously, wasn’t referring to himself, but rather to UK: Claudio De Oliveira tel +44 (0) 207 316 9271 US: Barbara Faiman tel +1 646 736 1852 the Anglican clergyman, William Dodd, who was hanged on June 27, 1777, for forgery. [email protected] An execution is certainly a deadline that cannot be ignored—it is, after all, literally Publisher Katie Palisoul a matter of life and death—hence its ability to concentrate the mind. But what about [email protected] Group Publishing Director Lee Hartt the January 3, 2018, Mifi d II deadline? To what extent are capital markets fi rms’ minds [email protected] concentrated on that deadline? That’s a diffi cult question to fathom, although if attendees Managing Director Celine Infeld [email protected] at Waters’ recent Mifi d II event in London can be used as a proxy for the industry, the Chief Executive Tim Weller answer is not very much at all. In fact, not a single fi rm present at the half-day event Incisive Media Head Offi ce confi rmed that they would be in a position to comply with all the Directive’s tenets come Haymarket House 28–29 Haymarket January 3. But, if capital markets fi rms are searching for mitigating circumstances and a London SW1Y 4RX tel: +44 (0)20 7316 9000 modicum of solace for their apparently underwhelming preparedness, they need look no fax: +44 (0)20 7930 2238 further than the UK’s Financial Conduct Authority (FCA) and the European Securities and Incisive Media US Markets Authority (Esma), both of which are unlikely to be in any better position. 55 Broad Street, 22nd Floor New York, NY 10004 Still, not drawing a line in the sand or continually postponing deadlines is a slippery tel: +1 646 736 1888 slope, especially when regulations are concerned. I would argue that if you’re going to Incisive Media Asia let deadlines slip, you might be better served not making deadlines at all. Remember 14th Floor (Unit 1401-3) Devon House, Taikoo Place Aesop’s fable about the boy who cried wolf? 979 King’s Road Quarry Bay Esma extended its Mifi d II implementation deadline by 12 months after the commuta- tel: +852 3411 4888 tion was initially proposed by the European Commission in February 2016 and confi rmed

Incisive Media Customer Services some three months later. The industry breathed a collective sigh of relief and did … tel: +44(0) 1858 438 800 nothing (anecdotally speaking, of course). But there will be no further extensions, and quite rightly so. What is clear is that for the fi rst few months of 2018, the EC, Esma and the FCA will have their kid gloves fi rmly donned when dealing with their various constituents. European regulators have a long history of consultative oversight as opposed to the more uncompromising approach of the Securities and Exchange Commission and the Commodity Futures Trading Commission in the US. Both strategies have their relative To receive Waters magazine every merits, but come January 3 next year, I doubt whether any European market participants month you must subscribe to a will bemoan their overseer. That softly-softly approach will of course harden during the WatersTechnology Subscription or a Waters Premium Subscription. For more course of next year, but in the Directive’s immediate wake, fi rms will be cut a bit of slack information and subscription details, on the proviso that they have taken reasonable steps to comply. W visit waterstechnology.com/subscribe

Victor Anderson Waters (ISSN 1068-5863) is published monthly (12 times a year) Editor-in-Chief by Incisive Media. Printed in the UK by Stephens & George Print Group, Dowlais, Merthyr Tydfi l, Wales.

Published by Incisive Risk Information Ltd and Incisive RWG Sell Side Inc. Copyright Incisive Risk Information (IP) Ltd & Incisive RWG Inc. All rights reserved. No part of this publication may be reproduced, stored in or introduced into any retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written permission of the copyright owners.

waterstechnology.com April 2017 1 1 Editor’s Letter 4 New Perspectives 12 War of the Clouds The next great battle in the fi nancial services space is likely to be the public cloud sector. Anthony Malakian looks at how competitors are looking to chip away at Amazon’s lead. One thing to keep in mind: There can be multiple winners. 16 Breaking the Code When ripping and replacing legacy platforms is not an option, the answer for some is code modernization. Others say code modernatization is a buzzword, but the key area is tapping into parallelization techniques. By Emilia David 25 Robo-Advisors Permeate Asian 16 Markets Breaking the Code Bjarne Stroustrup Robo-advisors are becoming more By Emilia David popular in Asia, especially among retail investors. While it will take some time, these advancements are likely to seep into the institutional space in years to 12 come. By Wei-Shen Wong War of the Clouds By Anthony Malakian

20 The Waters Profi le: Ian Thompson, Fidelity International By John Brazier

2 April 2017 waterstechnology.com April 2017

30 Out of the Shadows GET MORE ONLINE The concept of shadow IT seems simple: News. Webcasts. Video. A project is started without proper authorization because those involved want Audio. Special Reports. Get it to avoid having to jump through the various all at waterstechnology.com hoops required to give it the green light. In actuality, shadow IT is much more nuanced. By Dan DeFrancesco 25 34 CRM Practices Under Scrutiny Robo-Advisors The new General Data Protection Permeate Asian Regulation is an upcoming European Markets By Wei-Shen Wong mandate for the protection of personal data. However, the fi nancial services world has not yet realized the extent to which it will affect it. Most notably in the fi eld of customer relationship management systems, the GDPR will defi ne new ways on how fi rms should process their clients’ data. By Aggelos Andreou 38 John Brazier: Will Fractured Be Left Behind in Post-Brexit Order? 40 Emilia David: Legacies Updated 41 Aggelos Andreou: If It’s Europe, It’s Mifi d II 30 Out of the Shadows 42 Human Capital By Dan DeFrancesco

39 Dan DeFrancesco: Learn to Live in the Shadow: Accepting the Existence of Shadow IT

waterstechnology.com April 2017 3 New Perspective

Thomson Reuters Enhances Velocity Analytics Platform with Mifid II Functionality

Thomson Reuters will offer best execution and systematic internalizer determination services from January 3, 2018. By Aggelos Andreou

fter a year of modernizing its market data,” says Carley. “We did tion in corporate bonds because the Velocity Analytics platform, that because clients wanted to use underlying data is not available and it AThomson Reuters is preparing their existing assets.” is diffi cult for the analytics to be able for the new European regulatory land- He says this integration makes to demonstrate quality execution,” scape by introducing two major services it possible for users to leverage their says Carley. “We are working with all for best execution and systematic inter- investments and apply analytics. “By those venues to onboard that content nalizer determination. Adopting the off ering this technology as part of our onto our platform and then integrate technology of Kx Systems, Thomson Elektron managed services platform, that with the Velocity Analytics tech- Reuters is gearing up for Mifi d II, clients can take it as a service and access nology, off ering a multi-asset class best adding two new functionalities that aim it immediately,” Carley says. execution service.” to help end-users comply with two of Brennan Carley End-users will still have to upload the most critical areas of the upcoming 7KRPVRQ Mifi d Features their trades and the platform will com- 5HXWHUV regulatory mandates. Brennan Carley, This transformation resulted in two pare those trades against the market and global head of enterprise propositions new functionalities, about to become produce reports and analysis showing and product frameworks at Thomson available on the Velocity Analytics plat- the performance of those trades. Reuters, tells Waters that a year ago, the form when Mifi d II comes into force The second Mifi d service refers vendor decided to modernize its legacy on January 3, 2018. For starters, clients to the systematic internalizer (SI) Velocity Analytics platform, looking at will be able to ensure and demonstrate determination. Under Mifi d II, a fi rm the demands of Mifi d II. that they have achieved best execution, automatically becomes an SI if it trades “Mifi d is a huge data management for equities, foreign exchange (FX), over a percentage of the daily volume challenge for the industry,” he says. “It fi xed income, and derivatives. “The in an instrument. If the quantity of requires customers to do a lot of ana- feature will be able to take their trade the trade exceeds a certain number lytics to demonstrate things like best data and benchmarks, analyze and (percentage), then it is regarded as an execution, and to determine whether compare it with market prices across internal trade execution, as opposed to they are a systematic internalizer in a the entire market to demonstrate they being sent out to a public market. particular instrument.” have achieved best ex for their clients,” According to Carley, however, the This modernization was a pro- says Carley. problem with SIs is more complicated cess supported by technology vendor A s pa r t of Thom son Reuter s’ M i fi d than that. “The tricky thing is that this First Derivatives and its subsidiary Kx II program, the vendor is working threshold is not a fi xed percentage. It Systems, the technical know-how of with over 50 exchanges across Europe depends on the asset class, on the volume which Thomson Reuters inherited and and a number of trading venues that that’s been traded, and the amount of integrated with its content. “That’s eve- currently are not providing pre- and liquidity, among other things,” he says. rything from real-time feeds, pricing, post-trade transparency, such as dark “You have to do calculations across all and reference data,” Carley explains. pools from which Thomson Reuters instruments on a daily basis.” “We integrate these into our historical will take prices and integrate them The new feature provides an database, which includes data from over into its Elektron platform. “It is hard early warning before a fi rm is about 400 exchanges around the world, going today to demonstrate best execu- to become a systematic internalizer. back 20 years.” “If they get warned, they will need The vendor also integrated THE BOTTOM LINE to change their trading activity so the technology with its Elektron they don’t crash a specifi c thresh- managed services platform, the Ř$VSDUWRILWV0LƂG,,VWUDW LQJLQ-DQXDU\DEHVW old,” Carley explains. “It’s not just a HJ\7KRPVRQ5HXWHUVZLOO H[HFXWLRQVHUYLFHDQGD Thomson Reuters Enterprise RIIHUWZRQHZIHDWXUHVLQ V\VWHPDWLFLQWHUQDOL]HU day report; it’s a real-time analysis of Platform (TREP). “That’s software LWV9HORFLW\SODWIRUPVWDUW GHWHUPLQDWLRQVROXWLRQ data across a large volume of diff erent that our customers use to manage instruments.” W

4 April 2017 waterstechnology.com New Perspective

IEX Questions NYSE’s Plan, Intent behind Speed Bump Proposal

John Ramsay, IEX’s chief market policy offi cer, speaks to Waters about the issues the exchange sees with NYSE’s plan for implementing a speed bump at NYSE MKT. By Dan DeFrancesco

h, how the tables have turned. Installation Issues just by the nature of software-imposed A year ago, the Investors IEX’s critique of the proposal boils modifi cations. We don’t really know O Exchange (IEX) was in the down to two distinct points: How what the amount of variability might midst of the fi ght of its life, working the speed bump will operate, and the be. We don’t know how they’ll moni- to gain regulatory approval from the reasoning behind it being built. In tor for it, or what they’ll do if it ends up Securities and Exchange Commission regards to the former, one major dif- being outside whatever tolerance they (SEC) to become a national exchange. ference between NYSE’s speed bump decide is appropriate for it,” Ramsay The process was a constant battle, as and IEX’s, and an area of concern, is the says. NYSE declined to speak to Waters several fi rms, including some exchange fact that it will be executed using soft- for this story. operators, submitted comment letters ware, not hardware, according to John voicing concerns about the potential John Ramsay Ramsay, IEX’s chief market policy Routing ,(; impact IEX and its 350-microsecond offi cer. IEX’s speed bump is created Another diff erence between the two speed bump would have on the wider using a coil of optical fi ber—famously speed bumps, and an issue raised in markets if approved. referred to as the “magic shoe box” IEX’s comment letter, is around how Twelve months later, IEX has in Michael Lewis’ Flash Boys—which orders will be routed. According to been operating as an exchange for every message has to go through. This NYSE’s proposal, orders sent to the several months, and some of those ensures that each order will face the exchange will go through the speed who opposed IEX’s bid have since same exact delay due to the physical bump, access any liquidity in the announced plans to implement a presence of the speed bump, Ramsay exchange’s order book and then go speed bump or order type that will tells WatersTechnology. through another speed bump before function similar to the one they The concern with a software being routed to other markets. This is fought so valiantly against less than a delay, Ramsay says, is that it could be in contrast to IEX’s speed bump, which year ago. The most recent exchange inconsistent, which means the full treats incoming orders the same but operator to make such a move is 350-microsecond delay might not only delays outgoing orders fi lled at NYSE Group, which in January always occur. The variance in the delay IEX. This is done to ensure the orders proposed a 350-microsecond delay could allow users to attempt to game get to other markets before the quotes for orders on NYSE American, the the speed bump—for example, by could potentially be faded, according to newly proposed name for what is identifying certain patterns in which Ramsay. currently known as NYSE MKT, the speed bump is particularly slow or The problem with the way NYSE the exchange operator’s venue for fast at a specifi c time of day. is planning to operate its speed bump, small- to mid-cap companies. The “Potentially, NYSE’s speed bump according to Ramsay, is that it appears exchange even went so far as refer- would be subject to greater variability to be giving preference to fi lls on encing IEX 61 times in the 15-page their own market. Ramsay questions proposal it submitted to the SEC, THE BOTTOM LINE whether this design acts counter to get- stating that the delay mechanism ting the best possible fi lls for investors’ it would implement would oper- Ř1<6(KDVVXEPLWWHG DQGTXHVWLRQHG1<6(őV orders. ate similarly to IEX’s speed bump. DSURSRVDOWRWKH UHDVRQLQJEHKLQGWKH Just as important, Ramsay says, is 6(&UHJDUGLQJWKH SURSRVDOJLYHQLWVSDVW And now, in a complete reversal of LPSOHPHQWDWLRQRID VWDWHPHQWV1<6( NYSE’s lack of explanation regarding their roles from a year ago, IEX has PLFURVHFRQGVSHHG FLWHVWKHDELOLW\WRRIIHU why it is proposing the implementation submitted a comment letter criticiz- EXPSRQ1<6(0.7 DGGLWLRQDORSWLRQVWR of a speed bump on one of its markets. ing the NYSE’s proposal, calling it FXVWRPHUVDVHYLGHQFH Simply saying the decision is based Ř,(;UDLVHGFRQFHUQV VXSSRUWLQJLWVSURSRVDO “substantially defi cient in both justi- DERXWWKHVSHHGEXPS on off ering clients more options isn’t fi cation and detail.” adequate, according to Ramsay. W

waterstechnology.com April 2017 5 New Perspective

Automation Must Be End-to-End Financial institutions looking to automate processes shouldn’t keep the technology in only one area of the business, speakers at a recent DTCC forum say, but rather should make it into a holistic solution to add more value to the business. By Emilia David

s more banks look toward tasks as opposed to a holistic, end-to- return-on-invest model, you’re going automation to handle vast end business aspect, but because of the to have to think again. To get this A amounts of data, automation data explosion we can’t do that.” right, you need new metrics.” experts say the way for the technol- He adds that fi rms that want to He says fi rms, again and again, ogy to fully succeed is to unleash it take the automation route should are unsure of how to make pilot pro- as a full end-to-end solution rather look at it from a value standpoint and jects fi t into their ecosystem, mainly than keep it in silos. Speakers at the ask how the technology can be better because they insist on going back to DTCC Fintech Symposium held in used. Automation simplifi es not just return-on-investment models built New York point out that automation how information is handled, but to track systems like Excel spread- is crucial for the industry as it deals how transactions are analyzed and sheets rather than disruptive new with an infl ux of data. Around 90 recorded. Keeping only one area of the technology. percent of the data that now exists was business automated makes little sense. EY’s Park notes that despite the created in the past 10 years, according For Lee, the big issue facing fi nancial challenges—and some stubborn- to Roger Park, partner/principal and fi rms when it comes to automation is ness—of fi rms, automation is now strategy and innovation leader for the lack of interoperability between on the cusp of becoming even more fi nancial services at consultancy EY. systems and processes. Unfortunately, widespread. Effi ciency off ered by “Today, there’s a pervasiveness of some fi nancial institutions may still automation also means fi rms and data, just a lot more data that we’ve fi nd themselves unable to fully auto- their employees have to be more ever seen before,” Park says. mate all processes, or prefer certain unique. Bank employees must also As a means of combing through tasks to remain manual. But if any prove that they can think out of the all of the information now available, process is automated, it makes sense box. Automation can do a lot of the automation technology—whether it’s to automate all. jobs people do except for idea genera- robotic-process automation, machine tion or working without certain set learning or artifi cial intelligence—is The Cost parameters. also now more pervasive. Park says Christopher Surdak, program director Surdak says banks and their costs of these technologies have come at the Institute for Robotic Process employees need to diff erentiate from down so fi nancial institutions have Automation, says thinking about new answers or tasks that a robot can do. more access to them. ways to look at investment costs could He says it is the “crazy” employee, be the answer to fully automating the one who comes up with out-of- No Silos business processes, even those that the-box ideas and solutions, that is But automation projects are not seem resistant to change, which he complementary to the automation holistic, as some institutions prefer calls “superbugs” of the IT world. process. It can also change the way to keep automation to only one pro- “We’ve tried to automate that step some banks outsource certain ser- cess—onboarding, for example—even for 45 years and it hasn’t been done vices. Business process outsourcing though it is not deployed elsewhere. yet. The reason could be cost, com- is directly threatened by automa- And that, speakers at the forum say, plexity, or regulation,” says Surdak. tion since it eliminates the need for is where the problem lies. James Lee, “If you measure that technology with requiring a larger team to handle DTCC managing director and CTO this superbug and still use the same specifi c tasks. for enterprise infrastructure, says some Surdak, Lee, and Park had one automated systems are used only by THE BOTTOM LINE last piece of advice for fi nancial fi rms a few processes, which can limit the looking to automate: Start smart and amount of data that is processed. “The Ř$XWRPDWLRQVKRXOGQőWEH PHWULFVFDQHQFRXUDJH focus on the business value of the GRQHLQDVLOREXWUDWKHULQ DXWRPDWLRQIRUœDXWRPD way we’ve approached this before is in DKROLVWLFZD\WKURXJKRXW WLRQUHVLVWDQWŔVWHSV project and integrate it into diff erent a silo, and that’s where the challenge WKHRUJDQL]DWLRQ1HZ platforms to increase its interoper- is,” Lee says. “You automated specifi c ability. W

6 April 2017 waterstechnology.com New Perspective

Mifid II’s Impact on Fixed-Income Trading Sharpens As Mifi d II draws near, fi rms are having to fi gure out how best to address its new regulatory demands in what could well turn out to be a drastically different landscape for fi xed-income traders. A side effect of that permutation, though, could also mean more budget spend directed to new platforms and analytics tools. By Anthony Malakian

n the fi nancial markets, there are report-generation practices. And there “The process is very unstructured many groups concerned about the are still large numbers of vagaries that in fi xed income and it’s supported by Ilooming Mifi d II deadline. Of fi rms are having to navigate. a lot of data, which makes the best those, fi xed-income traders—and spe- For example, the rules around execution process very diffi cult,” he cifi cally fi xed-income traders on the best execution requirements are says. “Mifi d II is resource intensive buy side—are facing major questions broad, which has created some con- with a lot of unknowns.” as to how they will react come January sternation throughout the industry And more worrisome are the trade 3, 2018. as to whether they are following reporting requirements, Antoniades As an example, at the European the letter of the law. In equities, for says. Starting in January, depending on Trading Architecture Summit held last example, you have an exchange to who fi rms trade with, what capacity November, Ayaz Haji, head of Mifi d II benchmark best execution against they trade and the size of the trade, asset technical architecture and data strategy using real data points. Conversely, managers are potentially responsible for for Goldman Sachs, noted that the new in the corporate bond market, trade reporting, which is a whole new regime could eff ectively kill voice trad- while there are electronic platforms world for most on the buy side. ing in the fi xed-income market. increasingly populating the market, “Most asset managers don’t want “It would be very diffi cult for fi rms there is not an audit trail like there is to be in the business of having to do to be Mifi d II-compliant if they are in the equities market. trade reporting and therefore they’re voice trading, if they are trading what So, in this scenario, how do trad- going to change the way that they the European Securities and Markets ers estimate what the best bid or off er trade to make sure that they trade with Authority (Esma) deems to be liquid is in a specifi c bond that hasn’t traded a party or venue that does the trade products,” Haji said. “The true cost for weeks or even months? If they go reporting for them,” he says. of Mifi d II will become apparent very to the market to get quotes, they won’t The calculus of making a trade is quickly once we start complying with get best execution. How do they get likely to change, Antoniades says. the regulation.” this data? Is a quote from a dealer at the “Today you look at your Barring another (unlikely) delay, morning open good enough? These Bloomberg messages and see who has the Directive’s deadline is drawing near. are questions that need to be answered, a bid in a bond you want to sell. That’s Constantinos Antoniades, who heads according to Antoniades. no longer enough under Mifi d. You up Liquidnet’s fi xed-income business, need to know under which capacity tells Waters that he recently spoke with THE BOTTOM LINE this person is trading—agency or “a very senior person at a very large principal—whether they’re a system- fi rm” and that individual told him that Ř%X\VLGHWUDGLQJGHVN ,QƂ[HGLQFRPH atic internalizer or whether they’re they “eff ectively spend 75 percent of EXGJHWVZHUHƃDWLQ GHVNVVSHQWSHUFHQW operating in a venue. Depending on their time on Mifi d II and the other 25 EXWƂ[HGLQFRPH RQFRPSHQVDWLRQDQG all those factors, you may or may not percent running the trading business.” WUDGLQJGHVNVLQFUHDVHG SHUFHQWRQWHFKQRORJ\ be able to execute that order,” he WKHLUEXGJHWVE\ WKDWGLIIHUVIURP SHUFHQWDQGWKHRXWORRN LQ says. “Every time you look at a price Best Ex IRUDQGEH\RQG or a quote or trade, you’ll be doing ORRNVIDYRUDEOH Ř$VƂ[HGLQFRPH After all, changes have to be made to WUDGLQJEHFRPHVPRUH something diff erent than what you’re the infrastructure to ensure compli- Ř%XGJHWƂJXUHVKDYH HOHFWURQLFWUDGLQJGHVNV doing today. The level of complexity ance, fi rms need to be able to collect VNHZHGPRUHWRZDUG KDYHLQFUHDVHGWKHLU in terms of how you source liquid- WHFKQRORJ\DQGDZD\ VSHQGRQ206VDQG and store more data more effi ciently, IURPFRPSHQVDWLRQ (06V ity will increase dramatically under and they have to streamline their Mifi d II.” W

waterstechnology.com April 2017 7 New Perspective

Giancarlo Sets New Course for CFTC, Including Focus on FinTech Firms CFTC acting chairman (and likely permanent chair) Christopher Giancarlo gave a speech at this year’s FIA Boca conference in Boca Raton, Florida, that laid out his agenda for the agency going forward. Included is a plan to foster innovation among fi ntech fi rms and reduce the CFTC’s regulatory footprint. By Anthony Malakian

t this year’s Futures Industry from standalone centers to seamless rules and regulations that need to be Association (FIA) Boca con- trading webs. Meanwhile, market updated for relevance in 21st century Aference, held on March 15, regulation by the CFTC has not digital markets, and identify how it Christopher Giancarlo, delivering kept pace,” he said. “In too many can help promote fi ntech innovation his fi rst speech after being named by ways, it remains an analog regulator in the US. President Donald Trump as the per- of an increasingly digital market- “This fi ntech review will be com- manent chairman of the Commodity place, curtailing its eff ectiveness in pleted soon and you will hear more Futures Trading Commission (CFTC), overseeing the safety and soundness about it in the next few months,” he laid out his vision for the regulatory of markets. … The CFTC must be a concluded. body going forward under the new leader in adopting the ‘do no harm’ Christopher administration’s watch. He says the Giancarlo approach to fi nancial technology KISS Commission’s focus—and the focus &)7& similar to the US approach to the Giancarlo also said—pursuant to of other regulators in the US—since early internet.” Trump’s executive order directing the 2008 fi nancial crisis had been to Giancarlo said he wants to help federal agencies to name a regulatory create a “regulatory superstructure” foster fi ntech innovation and to do reform offi cer and establish a regula- to try and avoid another catastrophe. that, in January he instructed his staff tory reform task force to remove any But those days are over, Giancarlo said. to conduct a review of fi ntech inno- redundant and unnecessary regula- “So much policymaking, rulemak- vation issues “including those arising tions currently on the books—that the ing and thought has been directed at from a range of new digital technolo- CFTC’s fi rst step is to reduce excessive building a regulatory superstructure gies.” That means looking at how the regulatory burdens, which will be that ostensibly would prevent another Commission can leverage fi ntech centered around a new project dubbed 2008-style crisis that we’ve lost sight innovation to make it a more eff ective KISS—Keep It Simple, Stupid. of the emerging challenges just ahead regulator, examine how these com- “Project KISS will be an and what the right regulatory response panies can help the agency to identify agency-wide review of CFTC rules, is,” he said. “The era of Dodd–Frank regulations and practices to make implementation at the CFTC is now them simpler, less burdensome and less drawing to a close. It is time for the THE BOTTOM LINE costly,” Giancarlo said. It will be led by agency to resume normalized opera- Ř*LDQFDUORUHFHLYHGD Ř$QRWKHUVRXUFHVDLG his chief of staff , Mike Gill, who will tions and practices.” VWDQGLQJRYDWLRQIURP œ7KHUHZDVDJHQXLQH serve as the agency’s regulatory reform WKRVHLQDWWHQGDQFHDWWKH HQHUJ\LQWKHURRPŔDIWHU offi cer. Fintech Firms FRQIHUHQFH7DONLQJZLWK KHZDVƂQLVKHGWDONLQJ “In addition,” he continued, “the DERXWDGR]HQGHOHJDWHV %XWDV*LDQFDUORKLPVHOI Giancarlo laid out a three-part agenda DWWKHHYHQWHYHU\RQH QRWHGWKLVGRHVQőWPHDQ CFTC will soon issue a call for recom- that aims to foster economic growth, VHHPHGH[FLWHGDERXW DQHUDRIœUHSHDOLQJRU mendations from the public to make enhance the US fi nancial markets, ZKDWWKLVZLOOPHDQIRU HYHQUHZULWLQJŔ'RGGŎ our existing regulations simpler, less and right-size the agency’s regulatory WKHPJRLQJIRUZDUG )UDQNLWVLPSO\PHDQV burdensome and less costly. … Let me %HWZHHQ'RGGŎ)UDQN WKDWƂUPVFDQWDNHD footprint. Included in his plan is an ini- DQG0LƂG,,DQGHYHU\ GHHSEUHDWKDQGŏIRUWKH be very clear: This exercise is not about tiative to focus on fi ntech companies UHJXODWLRQLQEHWZHHQRQH WLPHEHLQJŏQRWH[SHFW identifying existing rules for repeal or and “embrace technological change.” VRXUFHVDLGœ(YHU\ERG\ DQ\QHZPDQGDWHVWR even rewrite. It is about taking our KDVUHJXODWRU\IDWLJXHDQG FRPHGRZQWKHSLNH “We live in a time of fundamen- LWZDVUHIUHVKLQJWRVHHWKH ZKLOHUHGXFLQJVRPH existing rules as they are and apply- tal transformation of global trading SDWKWKDW*LDQFDUORZDQWV UHGXQGDQFLHV ing them in ways that are simpler, less markets from analog to digital, from WRWDNHŔ burdensome, and less of a drag on the human to algorithmic trading, and American economy.”’ W

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18 May, The Waldorf Hilton, London

Will you be joining us? WatersTechnology is delighted to announce that registration is now open.

Building on the success of 2016, the Buy-Side Technology European Summit will address the latest trading and technology challenges affecting the buy side in an ever changing fi nancial and regulatory landscape.

Join us in May to develop new working relationships and to hear about the latest developments in the buy-side industry.

Topics to be discussed this year: Implementing MiFID II Improving technology Advanced data analytics infrastructure

Artifi cial Intelligence and Cyber Security Machine Learning Disruptive Technologies Sourcing liquidity Post-trade processing

Visit buy-sidetechnology.com/eu for more info and to book. For sponsorship opportunities please contact Phil Ansley at [email protected] or call +44 (0)207 316 9643

Panel sponsors: Co-sponsor: Barista sponsor: Hosted by:

@WatersTech #BSTEurope buy-sidetechnology.com/eu Sponsored Statement

The Technology Impacts of Mifi d II (Part 3)

In the fi nal article of this three-part series looking at the impact of Mifi d II on trading operations and technology, Richard Bentley turns his attention to the post-trade environment and the activities immediately following the execution of a client order.

uch of the impact of Mifi d smart order routers or pre-trade risk larger range of eligible instruments— II on post-trade workfl ows gateways, all of which have their own that needs to be reported. Mconcerns data: the need means of order identifi cation and data For trade reporting, Mifi d II brings to collect, normalize, transform and logging. Linking child or grandchild a new set of rules with the intent to enrich an extended dataset for analy- orders generated by a home-grown signifi cantly broaden visibility into sis, reporting and archiving purposes. algo box with client orders staged in trading activity in listed and over-the- We look fi rst at the general need for a vendor OMS, or moved between counter (OTC) instruments. Accuracy unifi cation of order data across systems diff erent vendor high-touch and low- is key; over-reporting is not permitted, for record keeping, before considering touch platforms, is not trivial; multiple so the “if in doubt, report” approach other post-trade workfl ows. layers of mapping between data export that has been the norm is acceptable no and logging mechanisms and order longer. The shrinking time window Order Data and Record Keeping identifi er schemes may be required to for reporting (reduced to a maximum While new regulations for order record reconstruct a complete, normalized of one minute from execution in many keeping (ORK) have at heart the need sequence of events. cases) implies an automated process to generate a permanent audit trail, Firms will be rewarded for invest- with close affi nity to the OMS that they imply a strong requirement to ment in centralized solutions for is tracking executions. But fi rms that capture and correlate everything that collecting and normalizing data from deploy multiple order management happens to a client order as part of the other systems to provide the required system (OMS) solutions for diff erent historical record. This holistic view data structures for downstream pro- asset classes, regions or trading desks forms a key element of other post-trade cesses, including archival storage for will want to centralize reporting due activities including trade and transac- record-keeping purposes. The alterna- to the complex rules, data enrichment tion reporting, best execution and tive is a series of complex modifi cations and connectivity to reporting venues. market-abuse monitoring. As well as of existing systems to generate multiple This introduces the idea of a real-time extended information regarding each views of the data they hold to meet the trade reporting service, connected to, client order, the details to be captured needs of diff erent post-trade processes. but independent from, specifi c front- include all associated child (and grand- offi ce solutions. child) orders, all house and market fi lls, Trade Reporting The logic to determine who is any operations such as cancellations or Trade and transaction reporting are responsible for reporting in diff erent amendments, as well as details of more diff erent processes with diff erent scenarios is more complex under Mifi d complex activities such as management goals; the purpose of the former is to II—technologies like business rules of composite orders. publish trades to other market partici- engines (BREs) may be needed to A chronological biography must pants in the interests of transparency, automate this logic. In some circum- be captured, enriched and normalized while the latter is aimed at regula- stances, buy-side fi rms can delegate across all fi rms’ trading systems that tory scrutiny of trading activity for authority for trade reporting to their touch a client order, even though many compliance with market abuse regu- brokers, but they are still accountable of these systems may have no link lations. Despite the diff erences, Mifi d for ensuring reporting is done cor- to the client order itself. Firms com- II presents similar challenges for both: rectly. Consequently, more buy-side monly deploy a heterogeneous mix new reporting logic to determine fi rms will handle their own trade of systems for high- and low-touch what to report and by whom, and a reporting, or, where an “assisted report fl ows with specialized algo boxes, greatly expanded set of data—for a agreement” is in place, will need real-

10 April 2017 waterstechnology.com Sponsored Statement

time drop copies from their brokers reports, including identifi ers for venue, requirements will necessitate further of all reports done in their name, in entity, instrument, currency and more. technical work to integrate new sources order to match against their trades to This reference data is fragmented of pricing data and extended trade cap- validate correctness. across diff erent authorities, updated ture feeds from trading venues. Mifi d II allows intermediaries to on diff erent frequencies and accessed More formal reporting on quality set up as reporting venues, handling via diff erent mechanisms, which the of execution is also required including pre-trade and post-trade publication ARM will handle. The ARM will annual reports relating to top execu- of quote and trade information. Such also hold some of the more sensitive tion venues, percentage of client orders third parties will be approved by the data on the individuals involved in executed on each venue, how much of regulator and will operate under an the decision-making process lead- this was passive versus aggressive, and Approved Publication Arrangement Richard Bentley ing to order generation and routing. more. This emphasizes the need for Ullink (APA). A number of fi rms have The exact mechanisms to handle this capture of detailed order and execution announced that they will operate sensitive data are still being discussed, information in a normalized form as APAs, but with diff erent levels of and data security requirements will be the basis for later analytics processing coverage of Mifi d instruments and paramount in any solution. and report generation. diff erent workfl ows, data formats Despite the longer time win- The overall impact of the above and APIs. Besides the obvious need dows—transaction reports must be sent changes to post-trade workfl ows is to to build and certify new connectiv- to the regulator on a T+1 basis—fi rms drive a higher degree of centraliza- ity, automated business rules will be may wish to report to their ARM tion and automation. Compression in required to select the most appropriate much quicker, to detect and resolve reporting windows and the need for APA depending on instrument and problems well in advance of regulatory consistent management of order and other characteristics of the trade. At deadlines. This, coupled with the com- reference data further blurs the line the user level, a unifi ed interface will plexity of rules and amount of data to between front-, middle-, and back- be needed that shows the status of all be included, means the entire transac- offi ce functions. A consequence for reporting—and allows interaction tion reporting process will also have to technology will be a greater focus on to cancel/modify reports and handle be heavily automated. open architecture and standardization APA rejections—regardless of which Because of the new trade and of APIs to allow specialized systems venue the report has been sent to. transaction reporting regime, and like order/execution management the impact on a broader set of market systems to inter-operate in real time Transaction Reporting participants, a number of “reporting with middle- and back-offi ce systems Mifi d II transaction reporting rules hub” services are being launched to act to enable bidirectional transfer of data also introduce new connectivity as intermediaries. Such services will and control. requirements—to so-called Approved alleviate much of the technical burden In this series of articles we have Reporting Mechanisms (ARMs). on participants, but not the overall examined some of the impacts of While fi rms will likely work with accountability for ensuring reporting is Mifi d II on current trading technol- multiple APAs for trade reporting, it performed correctly. ogy. The impacts are broad, touching is expected that a single ARM will connectivity and trading systems in suffi ce in most cases. The integration Best Execution the front, middle and back offi ces. requirements are also likely to be less Best execution rules are extended under Assessing the full extent of the impact, challenging, both in terms of work- Mifi d II. Fundamentally, the rules apply however, will only be possible once fl ows and technical integration; most to all “Mifi d instruments,” introducing Mifi d II has become “business as communication with ARMs will be requirements for accurate benchmark usual”; this will be many months—if through fi le upload. pricing for many non-equity products not years—from now. A vital role of an ARM is to enrich to calculate performance metrics. For transaction reports with data before trade information, venues are required Richard Bentley is chief product sending them to the regulator on to provide much more detail on trade officer at Ullink, a Paris-based behalf of market participants. Mifi d II capture reports, such as whether a trade provider of multi-asset trading introduces more than 25 new reference was passive or aggressive from the point technology and infrastructure to the data fi elds to be included in transaction of view of each counterparty. These buy side and sell side.

waterstechnology.com April 2017 11 Cloud

War of THE CLOUDS

The next great battle in the fi nancial n the morning of February and Skype—among other services— services space might not be in the 28, 2017, Amazon Web offl ine. As Waters went to press, the OServices (AWS) experienced cause was still unknown. blockchain or AI spaces—although an outage in the US-EAST-1 Region Amazon and Microsoft repre- they will play a role. No, the next among systems relying on its Simple sent the two largest cloud providers, monumental shift in the technology Storage Service (S3) cloud off er- globally. According to Synergy Re- space is likely to be the public cloud ing. The event wreaked havoc on search Group, in the public cloud ser- thousands of websites. The cause? A vices space through the fourth quarter sector. Anthony Malakian looks at how fat-fi nger mistake by a human in a line of 2016, AWS holds the largest share— companies like Google, Microsoft, IBM of code that took more servers than just over 40 percent—though Microsoft and Oracle are looking to chip away at desired offl ine. (Azure), Google (Google Cloud Plat- Amazon’s lead. One thing to keep in “Removing a signifi cant portion form, GCP) and IBM (IBM Cloud), mind: There can be multiple winners. of the capacity caused each of these are all gaining ground. The next 10 systems to require a full restart,” noted providers have lost market share com- Amazon in a blog post. “While these pared to these four. Synergy estimates subsystems were being restarted, S3 that the public cloud infrastructure was unable to service requests.” space—including both infrastructure- A few weeks later, on March 21, as-a-service (IaaS) and platform-as-a- Microsoft’s Azure cloud suff ered an service (PaaS) off erings—is “well over outage, knocking US East Coast $7 billion and continues to grow at al- users of Offi ce 365, Outlook.com, most 50 percent per year.”

12 April 2017 waterstechnology.com Cloud

The company’s founder and CEO, David Gurle, says Symphony’s archi- “From an engineering approach it really made tecture is reliant on microservices, sense to be able to service a wider variety of which depend on the computing clients and to take the best of each available power and high-end operating system service. The fast connectivity between the services of cloud providers. different systems really enables us to build “From an engineering approach it really made sense to be able to service a service that can span two—maybe even a wider variety of clients and to take three—cloud service providers.” David the best of each available service,” he Gurle, Symphony Communication Service says. “The fast connectivity between the diff erent systems really enables us to build a service that can span two— maybe even three—cloud service providers.” Amazon’s cloud off ering is domi- roadblocks for these behemoths— A great benefi t of bifurcation nant in the capital markets sector. sensitivity of data will still detract is that by using both Amazon and But there’s a sea change afoot. In the many; foreign laws will prevent Google, should there been an outage years to come, vendors that service others—their infl uence will only or jarring latency spike, Symphony’s both sell-side and buy-side institu- grow as they look to chip away at services—because they’ve been archi- tions will likely expand the way AWS. It’s a story of coexistence, not tected to both—can easily roll over to they interact with cloud providers, replacement. either platform. preferring to employ a multi-cloud Then there are those that are strategy. And the banks, hedge funds, Added Flexibility considering adding Google to their exchanges and asset managers will be For this feature, Waters spoke with toolkit. London-based CloudMargin, more willing to turn their data over about two dozen industry experts which specializes in collateral man- to these companies directly—some- about reasons for AWS’ dominance, agement workfl ow solutions, is thing that was unimaginable just fi ve and where other providers might currently an AWS user. Steve Husk, years ago. fi nd headway. While price will CloudMargin’s CEO, says, though, While Amazon—especially—and always be a major factor when it that a multi-cloud solution would Microsoft have jumped out on the comes to picking a cloud provider, allow for fl exibility so that two or others, Google is making a major price improvements are what’s three years later, should the market push in the capital markets space and expected. It’s the added tools, func- move, they can more easily adjust. is gaining ground rapidly, announc- tionality, geographical expansion, “To maintain a level of independ- ing some major client wins in recent and resource distribution that carry ence, I don’t want us to be tied to months. IBM has been making a push the most weight. And right now, it AWS; AWS is a fi ne platform and it in the blockchain space and could would appear that Google is fi nding provides us with a continuous, scalable make its presence better known if it the most success. level of performance for any number can commoditize its Watson cognitive Symphony Communication Ser- of services, but we have foreign clients technology on Wall Street to greater vices is one of those vendors that who may not want to use AWS; AWS eff ect. Even technology giant Oracle have already made the move to the would be a no-go area for them.” is looking to throw its hat into the bifurcated cloud system. The Palo He also says that while AWS ring, with its executive chairman, Alto, Calif.-based communication has a lot of “very nice tools,” such Larry Ellison, saying last September and collaboration platform provid- as its cloud monitoring service that the company’s main objective was er launched at the beginning of 2014 CloudWatch, depending too much to cut down the AWS lead. using AWS as its back-end cloud pro- on those services “would tie us into This also doesn’t mean that fi rms vider. In July 2016, it announced that the platform,” he says. are leaving AWS—at least not in the it was also going to connect to GCP, Lee McCormack, head of strat- capital markets. Rather, there will allowing customers to choose be- egy and product development for be a blending of public cloud pro- tween the two as their default stor- the vendor, says that this isn’t a life viders. While there will always be age provider. or death struggle. “The market is big

waterstechnology.com April 2017 13 Cloud

enough for multiple players—Amazon, platform that gives us this stuff out of their writes to be fast, as well. We don’t Google, Microsoft, Oracle—this is not the box where we don’t need to manage want them to have to come back to a winner-takes-all,” he says. “Amazon deployment to servers or manage scal- Virginia,” Lane says. “Spanner could is way ahead but there’s room for ing out when read or write throughput fundamentally change the way that we others; the market is going to grow.” needs to change,” Lane says. “What do general relational databases. The we’re trying to embed in our product benefi ts that it will provide us will be Cool New Tools development team’s mind is, when too great for us to care about having Trading Technologies (TT) has its we’re getting ready to build something, two cloud platforms. So we will be two-year-old cloud-based TT trad- let’s ask ourselves if Amazon or Google bridging the two, almost certainly.” ing platform on AWS. It tapped AWS off ers that as a service.” But it’s not all change for every- because of its range of services, such A game-changer for Google, Rick Lane one. For example, LiquidityBook, as CloudWatch and CloudFormation, according to Lane, could be its Cloud Trading a trading solutions provider based in which allows users to set up stacks of Spanner off ering, which is its globally Technologies New York, is expanding its usage of AWS resources in a “rubber-stamp distributed relational database service. AWS. It’s planning to leverage AWS’ fashion,” and the Cassandra cluster In February, Google launched the IaaS platform to allow it to expand in off ering, which TT uses to store all public beta version of the technol- markets where LiquidityBook cur- encrypted data. ogy. Spanner would represent the fi rst rently doesn’t have datacenters, and But TT’s CEO, Rick Lane, says relational database that has global con- it’s currently migrating its core opera- the platform will likely be bifurcated sistency and the ability to write data to tions to AWS. between Amazon and Google in the it anywhere around the globe. “We’re moving our core opera- near future. “Right now, a lot of the relational tions to AWS for a few reasons,” says “What we fi nd ourselves doing— databases that we have, there’s one Shawn Samuel, LiquidityBook’s CTO. and we’re trying to get better at this—is region where we can write to—such “The cloud lets you expand glob- we’re now taking a lot of those things as US-EAST-1 for Amazon—but we ally in a way that you can’t if you’re that we’re building ourselves and seeing can read from anywhere. That’s good trying to open co-located datacenters if Amazon or Google—from our per- in some cases, but if we have traders in if you’re a small fi rm. We can stand spective, it’s a two-horse race—off er a India or or , we want up overnight in the EU and Asia with

14 April 2017 waterstechnology.com Cloud

AWS and that’s something we couldn’t platform, says, “We’re just sitting porn site, that makes total sense; but do with the physical footprint we had around doing nothing.” The insti- I can’t go to Deutsche Bank and say in the US. Another big reason for the tution couples AWS with Azure, AWS decided to shut us down. IBM move—which is dictating our move to tapping into Microsoft’s Blob service doesn’t have that language. We’re also go almost entirely to the cloud, versus for disaster recovery. The bank is getting very close with Oracle, though a highly hybrid model—is the opera- looking at Google and IBM to see if we don’t have a relationship yet.” tional scalability. We’re a fast-growing they can help it cut down on its pro- fi rm and while we have a nice footprint cessing needs to run deep analytics. There Can Be More Than One in the US, the ability to scale 10 times A CIO of a hedge fund that According to multiple sources, high- or 100 times with the fl ip of a switch— deploys machine-learning technolo- frequency trading (HFT) outfi ts and that’s on-demand computing access.” Steve Husk gies within the fi rm is looking at IBM prop shops in Chicago have been But, that doesn’t mean that the CloudMargin to run alongside its AWS hookup. jumping onto the Google bandwagon company is locked into AWS. “They’re all pushing machine learn- thanks to the company’s analytics “Even though we’re not going to ing,” the CIO says. “If IBM can fi gure prowess and strong Chicago-based implement another cloud provider out how to make a Watson public salesforce. IBM is making inroads initially, we’re trying to stay multi- cloud—that would be interesting.” with fi ntech fi rms, especially those cloud,” to future-proof the company, When it comes to machine learn- connected to blockchain and dis- Samuel adds. ing, several sources noted Google’s tributed-ledger technologies. And TensorFlow—an open-source software Microsoft is leveraging its workfl ow Cracks in the Wall library for numerical computation that suite of solutions to bleed into other AWS is the undisputed leader in makes machine learning accessible to veins within an organization. Oracle the space. It’s been able to lower its regular users—as a major reason to will have to throw money and people price while adding new tools, such as consider Google. at the problem if they want to fi nd Amazon DynamoDB, its NoSQL cloud And a CEO of a data manage- any headway into the capital markets database service; Amazon Redshift, ment provider, who asked not to be space when it comes to its public- a data analytics off ering; and AWS named, has partnered with IBM to cloud off ering because it’s lagging far Lambda, a server-less compute engine store its data. The company looked behind. that allows users to run code without at AWS—it is spinning up sandboxes One might ask: Why make provisioning or managing servers. The in the AWS cloud—but for its core such an eff ort to gain marketshare provider launches a staggering number business functions, it has turned to in the fi nancial services sector? of services per year—in the range of a IBM Cloud because it didn’t have The reason—for Oracle and all the thousand-plus. the contractual restrictions that others—is that there’s room for mul- Others, though, have caught on to Amazon was looking to write into tiple winners. A Highlander “There this model and better understand the the agreement. can be only one” situation, this is not. necessity of it today than perhaps three “The thing we found about AWS There’s green fi eld to be found. If years ago. is that the contract doesn’t lend itself to you’ve built the cloud infrastructure, After the AWS S3 outage in our kind of customer,” said the CEO. other pieces can fall into place. February, a bank CTO whose “AWS has language in its contract that It will be incumbent on the fi rm uses S3 to power its customer they can basically close you down on providers to continue to show tech- relationship management (CRM) no notice. If you’re running a kiddie nological improvements to justify further investment—here’s where SALIENT POINTS the arm’s race comes in. Prices will continue to be pushed down, so diversifi cation will come through ŘIn the public cloud sector, AWS has estab- ŘOver the next few years, expect to see this ancillary solutions. lished a large lead, followed by Microsoft. space become increasingly competitive But Google is rapidly gaining ground, with among capital markets fi rms. While users In the capital markets, we’re get- IBM and Oracle looking to make inroads. aren’t likely to replace AWS—which is still the ting to a tipping point where AWS’ leader in the space in terms of price (usually) lead is bound to take a hit. But just ŘThe choice of cloud provider comes down and services—fi rms are likely to go with a to more than just price—though that’s still bifurcated model. like Bloomberg in the terminal and important. Just as vital, though, are the communications space, it’s easier to ancillary services that allow users to do new ŘFunctions like AI and machine learning things. to improve analytics could prove major lead from the front. The benefi ciaries differentiators. of this arms race are likely to be the users in the space. W

waterstechnology.com April 2017 15 Code Modernization

BREAKING THE CODE

As data demands increase for capital t large banks, it’s a familiar digitization project with lumbering, lament: Our systems have older platforms? markets fi rms, IT departments are A become unwieldly—a spa- But what if there’s a way to make struggling to get a handle on their ghetti of legacy platforms mixed with use of that clunky, overextended legacy systems and processes so as new tools. New reporting rules and a legacy infrastructure by making it to better capture, store and analyze desire to streamline processes in the work faster? Much like a heart, liver this information. When ripping and wake of the fi nancial crisis to better or kidney transplant to breathe new manage risk have led fi rms to reex- life into an aging patient, what if you replacing legacy platforms is not an amine their systems and overall IT could keep most of the body and tools option, the answer for some is code strategies. of a system, but transplant its wiring? modernization. Others say code The management of legacy The high-performance comput- modernatization is a buzzword, and the infrastructure has almost become a ing world may have an answer: code rite of passage for most technologists modernization. key area is tapping into parallelization at large fi rms. How can the existing techniques. Emilia David takes a look at infrastructure be remade to handle Fixing the Backbone where the industry is heading. the infl ux of data—which is ever Code modernization is borne out of increasing—and meet the demands parallelization—or parallel comput- of speed? How can you truly run a ing—which involves breaking tasks

16 April 2017 waterstechnology.com Code Modernization

into smaller pieces and then executing tasks simultaneously through diff erent “When we need to upgrade something, we sets of “threads.” Code modernization look at it in two ways. The first is the easier is a method to optimize the processors found in most backbone infrastructures. way: Take a subsystem and replace that with The process takes a systematic approach a newer subsystem—it’s faster, cheaper to driving optimized performance and ideal. The second is much harder. improvement out of older systems. By That’s when you have to work with data improving computer processors, they can become more powerful with the architectures, when you need to change old arrival of multiple cores in a single code that is messy. Fixing a thousand lines processing unit, and this can be cost of code isn’t difficult but if you’re fixing 10 eff ective when compared to ripping million lines of code it becomes a thousand and replacing a platform. times harder.” Bjarne Stroustrup, Morgan Code modernization seeks to make the best use of those computing capa- Stanley bilities by taking advantage of tools to improve performance. It updates codes He says there is so much unused The third step is to try vector in processors so the cores will work on potential in the hardware sold by Intel parallelization where identical instruc- various tasks simultaneously, and cuts and other chip manufacturers that tions are done on datasets inside a core. down on processing times, breaking up there is a need to help fi rms get the best It relies on technology called single these tasks through the diff erent cores. performance out of the servers in their instruction multiple data (SIMD), Code modernization is making existing infrastructure. For example, which allows a CPU to perform the waves in industries as disparate as Intel Xeon processors, one of the most same computation on multiple data medicine, manufacturing, and molec- prevalent in bank’s servers, can feature elements. Next, parallelization, or ular dynamics. Capital markets are up to 72 cores in a single processor, thread level parallelization, focuses on also getting in on the action, though Curley says. the outside of the core by coordinat- not with widespread adoption. Still, ing threads that share a single resource, many fi nancial fi rms have used paral- Five Steps and breaks up tasks the processor lelization methods as early as 2010, In a recent white paper, What is Code consumes into smaller parallelized and some have also moved on to code- Modernization, Intel lays out fi ve basic subtasks. modernization projects. stages. The framework helps develop- The last stage outlined by Intel Intel is one of the major advocates ers get the best application performance involves multi-node parallelism. At in the space and runs a program teach- in the shortest possible time. The steps this point each of the independent ing technology professionals from are: leveraging optimized tools, serial processes that were parallelized start all industries how to deploy code- optimization, vectorization, paralleli- to communicate with other processes modernization techniques within zation, and scaling from multicore to using a message system. Each process is their organizations. Joe Curley, senior many cores. assigned a rank number to determine director of Intel’s code-modernization In the fi rst stage, organizations the order of execution. These steps can organization, tells Waters that these choose an optimizing development be reordered by developers depending projects take advantage of the untapped environment. Intel said this step on their specifi c needs, but Intel notes power of modern processors. is crucial and “could substantially that the step-by-step methodology, if “Code modernization can mean an reduce the amount of work to do.” followed effi ciently, ensures each stage awful lot of things—from working in Following this, the optimization is considered and the application deliv- productivity languages to cloud tech- process begins with the application ers great performance. nologies to new archival practices or source code. The fi rm suggests look- annotating codes,” Curley says. “But ing at data and algorithm-related A Rose by Any Other Name one of the things it also means is to issues like choosing the right fl oating Bjarne Stroustrup is something of bring something up to the point where point precision, avoiding repetitive a legend in the fi eld of computer it takes the maximum advantage of calculations, and avoiding jump algo- science. In the late 1970s, he began modern hardware.” rithms during this step. developing the C++ programming

waterstechnology.com April 2017 17 Code Modernization

language, which has become one of the most popular languages used in fi nance—and any other industry, for that matter. Stroustrup currently serves as a managing director in Morgan Stanley’s technology division. He takes a contrarian view of code mod- ernization, calling it something of a buzzword. He does, however, believe parallelization—the key component of code modernization—provides large benefi ts for the fi nancial industry. So whether buzzword or not, these pro- cesses are still necessary because buying a new platform isn’t always appropriate. “Code modernization is widely used to mean upgrading your system in all possible ways, including paral- lelization. At Morgan Stanley, we are doing parallelization and we are using multicores,” Stroustrup tells Waters. “When we need to upgrade something, we look at it in two ways. The fi rst is The investment bank regularly “In order to process that volume the easier way: Take a subsystem and updates its technology platform to and trading engines to handle that replace that with a newer subsystem— ensure its performance for the next volume, clearly we’ve got to be faster. it’s faster, cheaper and ideal. The second fi ve to 10 years, Halliwell adds. In the old days, computer clock speeds is much harder. That’s when you have Stroustrup says computers were got faster and faster, but that’s not the to work with data architectures, when getting increasingly faster from the case anymore,” he says. “We now have you need to change old code that is 1980s into the mid-2000s, but since more cores that are not necessarily messy. Fixing a thousand lines of code then, fi rms have simply been throwing faster but have more computing power, isn’t diffi cult but if you’re fi xing 10 mil- more cores at systems to increase com- and we have to take advantage of that lion lines of code it becomes a thousand puting power. power in a diff erent way, which is times harder.” “Our data volumes are so much where parallelization comes in.” Stroustrup’s Morgan Stanley higher than they used be so the demand Intel’s Curley points out that while colleague David Halliwell, also a man- on complete computations is higher, code modernization is closely related to aging director in the bank’s technology too,” he says. “But since computers parallelization, it is more than that. division, says code modernization is are not going any faster, we have to do “There’s a lot of diff erent ways to something the industry has known more things in parallel, which is what write a code, and it’s interesting why about and practiced for decades, but the is driving the use of new hardware and we call it code modernization and not strategies are changing. programming techniques.” parallelization or optimization—it’s “Parallelization is not exactly It’s no secret that the volume of data that there are a lot of ways to parallel- modernization in my opinion. It’s being used by banks has been increas- ize code that aren’t optimal and there a running things in multiple threads ing exponentially over the last decade. lot of ways to optimize code that aren’t and machines, which is not new Halliwell estimates that Morgan parallel,” he says. “Being parallel is nec- because the industry has been doing Stanley receives 14 billion equity essary, but it is insuffi cient.” this for 20 years,” Halliwell says. market data ticks per day, a signifi cant “The diff erence now is that the increase from 10 years ago. As the data Need for Lean number of cores in a chip is growing volumes in the fi nancial services indus- Terry Roche, an analyst at Tabb exponentially so you can take advan- try grows, so, too, does the demand for Group, points out in a report titled tage of increased compute power.” greater computing power. Code Modernization: Doing More with

18 April 2017 waterstechnology.com Code Modernization

More, that the capital markets industry Roche says the actual age of the code Intel’s Curley says speed in and of is under growing pressure to control even delivers a unique problem for itself is not the only benefi t of using unsustainable costs. Much of this has to developers. code modernization to optimize do with the amount of data that needs “The ‘skills challenge’ is often processors. He says that by running to be analyzed in order to make trading exacerbated within capital markets as more of the bank’s data, the organi- decisions, meet regulatory require- today’s developers, in many instances, zation can leverage its own resources ments, or monitor risk against. Roche are not the code owner or creator of an to make intelligent decisions with tells Waters that code modernization application they may support,” Roche a greater level of accuracy, while takes advantage of what is already avail- says. “Capital markets have many making that information available able to banks so they can create a more applications that have been resident for to everyone in the bank. Opening holistic understanding of data. David Halliwell several generations of programmers, up the bandwidth of processors also “As an industry, we’re asked to do 0RUJDQ6WDQOH\ and that quite often creates an under- allows the fi rm to do more tasks it more with fewer resources, but with standable reluctance to modify code needs and even handle more real- something like code modernization, in the manner needed to unlock the time information. we can be making the most use of benefi ts of today’s hardware.” Speeding up processing time and computing power that’s already avail- exponentially increasing analytical able,” Roche says. Multiple Benefi ts power to data are, of course, just He adds that not enough fi rms are Morgan Stanley’s Halliwell says par- some of the potential benefi ts of code looking toward optimization methods allelization and taking advantage of modernization. Roche believes code like code modernization, and there is multiple cores has even allowed the modernization can even help usher a need for better understanding of the bank to save operating costs, at least on in more computing power for other method among companies outside of its infrastructure back-end. innovations like machine learning, Tier-1 banks. “Parallelizing our code actually artifi cial intelligence, and robotics. According to proponents of code allows us to process a lot more but use “Now, with the advent of arti- modernization, fi rms that employ it are fewer machines. We can have the same fi cial intelligence and machine able to make full use of legacy systems amount of computing processing, but learning, more computing resources already in place without having to with multiple cores we can cut down are needed,” he says. “But code mod- resort to upgrading to a new processor on the number of servers,” he says. ernization allows for the use of all the that is not necessarily faster. “The number of servers we have in the cores available, which means fewer Curley says banks do need to fi gure company went down signifi cantly in computers are needed to process cog- out how to balance performance with the past fi ve to 10 years even though nitive data.” the cost of maintaining infrastructure. the workload we are processing has Machine learning and artifi cial But he believes building a special gone up.” intelligence bring with them greater purpose computer specifi cally for high- He says having fewer machines ability to work through data and a performance applications is not a good running means less money spent on better understanding of the business. use of money. heating and cooling and less datacenter Legacy infrastructure can be unwieldy, “One of the things banks have space needed to house information. In it can be full of patches, but it can also to look at is that every time you put other words, Morgan Stanley is run- be made better, faster and more power- something special into their infra- ning its business a lot more effi ciently. ful. The key is focus and dedication. W structure, it incurs a tremendous cost,” he says. “What code modernization does is deliver breakthrough perfor- SALIENT POINTS mance on standard infrastructure that you can deploy, maintain, and update Ř&RGHPRGHUQL]DWLRQLVDIUDPHZRUN Ř,WVEHQHƂWVLQFOXGHIDVWHUSURFHVV WROHYHUDJHPXOWLSOHFRUHVLQSURFHV LQJRIWDVNVLQFUHDVHGFRPSXWLQJ through standards already set by capi- VRUVXVLQJSDUDOOHOL]DWLRQDQGRWKHU SRZHUWRKDQGOHGDWDDQGFXWWLQJ tal markets.” RSWLPL]DWLRQPHWKRGV GRZQRQWKHQXPEHURIVHUYHUV QHHGHG While code modernization has key Ř,WDOORZVƂUPVWRFRQWLQXHXVLQJ benefi ts, fi nancial services fi rms may OHJDF\LQIUDVWUXFWXUHE\PDNLQJXVH Ř&RGHPRGHUQL]DWLRQRSHQVXS have a hard time fi nding development RIWKHPXOWLSOHFRUHVSUHVHQWLQWKH FRPSXWLQJSRZHUWKDWFDQEHXVHG resources with the skills and experience SURFHVVRUV IRUQHZLQQRYDWLRQVVXFKDV$, to undertake it in their systems. Tabb’s

waterstechnology.com April 2017 19 The Waters Profi le

Embracing Change

20 April 2017 waterstechnology.com The Waters Profi le

Fidelity International’s chief technology and operations offi cer, Ian Thompson, talks to Waters about his new role at the fi rm, marrying the technology and operations departments to create new synergies between the two, as he seeks to overhaul the organization’s global technology infrastructure. By John Brazier with photos by Jonathon Goldberg

Many asset managers have found themselves at a crossroads of change in recent years, faced with tough decisions as to how to best adapt their businesses to leverage new technologies while complying with regulation and ultimately keeping end-investors happy. It’s not an easy journey to take, let alone succeed in, as it is often one with- out a fi xed ending, evolving alongside new market demands and technology developments. Fidelity International has always been a fi rm willing to adapt to change, both within and with- out. The company was fi rst established as the international arm of US-based Fidelity Investments in 1969, before it was spun off into an independent business in 1980. In the 37 years since then, Fidelity International has grown to become a global presence in 27 countries, managing $279 billion across asset classes, most prominently in equities, fi xed-income and multi-asset funds. It has been a journey of steady evolution for a fi rm that encourages its people to think a little diff erently. A notable example of this has been chief investment offi cer Dominic Rossi’s public campaign to reform a culture of rampant bonuses for board members and senior execu- tives, in an unusually vocal display of opinion from a buy-side executive. For Ian Thompson, who is charged with overseeing Fidelity’s global technologies, that evolution has recently been kicked up a notch. Having spent the better part of the last decade running the company’s global technologies since joining the fi rm in October 2007, Thompson has now also taken on responsibility for the opera- tions side of the business. The combination of the two departments means a vastly enlarged sphere of responsibility, but, according to Thompson, it also off ers a plethora of new opportunities for the fi rm to explore. “Merging technology and operations makes Ian Thompson, Fidelity International for a large department, but I can’t wait, I’m really

waterstechnology.com April 2017 21 The Waters Profi le

“I would categorize the wider asset the organization’s diff erent regional management community generally as presences. As Thompson says, while previously not necessarily seeing the clients in diff erent jurisdictions may need for technology as much as they not see any diff erence in the level of do now,” he explains. “Particularly service, doing the same things multiple investment banking—I think they saw times over is expensive and silos often technology as an advantage to allow mean functionality cannot be pushed them to make money, and therefore as a out to diff erent regions as quickly, an competitive advantage, and asset man- essential function for an investment agers generally saw it as an overhead. But manager seeking to off er the same levels the way the industry has moved quickly of service to clients regardless of their toward technology, they see that it can location. be an enabler and an advantage for all fi rms, including asset management and Global Program Fidelity International.” It is no surprise that Fidelity International During his decade-long tenure with is working on a variety of technology- Fidelity International, Thompson has oriented projects—not least of which is witnessed the evolution of technology- a $250 million strategic investment in driven strategies across the fi rm’s global its UK platform, business and infrastruc- activities, while also learning from the ture—and Thompson prefers to look ways in which non-fi nancial technol- at the overall picture, both in terms of excited because the synergies that I can ogy fi rms have been able to encroach where the work is being done and its see are huge; they perform in the same into almost every aspect of both profes- ultimate objective. countries, diff erent roles obviously, but sional and consumer life. He is currently overseeing a pro- in terms of putting together a global “What we are competing with gram of work with fi ve main concurrent team, they have the same business to now, in a fi rm where we have a direct- streams. The fi rst is a push to simplify support, so I am very excited about to-customer off ering, is our client’s last the organization’s global applications that,” he says. experience on their mobile phone with architecture, while the second focuses Apple or Amazon, not our direct asset on data archiving and retention as a Attitude Change management competition,” he explains. result of reduced server counts thanks Thompson’s enthusiasm for the task Such developments have led Fidelity to its simplifi cation eff orts, while ahead of him is plain to see and the International to adopt a “digital fi rst” also exploring the possibilities of data language he uses when speaking about strategy for its front-end, something that rationalization to reduce costs incurred how Fidelity is positioning itself across Thompson asserts is often mistaken for through storing data in diff erent ways the global markets shows that there are how a client’s journey plays out on the across its jurisdictions. no signs of trepidation regarding the web where there is a waiting game going “There is the simplifi cation of appli- sheer number of programs, ongoing on behind the scenes. “It’s more than that; cations and data, and underlying that is technology projects, and people to it is front to back,” he says. “We have digital infrastructure,” Thompson explains. “We manage as part of his expanded role. teams to design the digital front-ends for have multiple servers supporting multiple While it isn’t uncommon for our global businesses, which I then build databases and applications; the more you asset managers to merge technology in technology, but there is also an onus can take away the top layers, the more and operations, given the number of on technology and operations—which you can take away the services. On top overlaps between the two functions, is where I think there are synergies—to of that you then start looking at internal that wasn’t always the case. Thompson really automate front-to-back.” and external cloud and virtualization. We says that while there has been a sea The ultimate goal for Thompson, are quite far into the journey on those change in the industry regarding the like so many other asset managers at elements and with virtualization you eff ectiveness of technology, thanks in the moment, is to lower operating costs, can start to reduce the footprint of your part to the success of multinationals but also to decrease time-to-market service. If you put those three together, like Google, there are still enduring and user-response times. Automation it’s a hugely powerful and quite compli- preconceptions around technology is a key element to achieving this, cated program of work. Alongside that staff as “back-room boys” that means although an holistic view is required we have a stream of work within this the potential of new technologies can to assess progress in this space due to overall program to look at automation be ignored. varying degrees of automation between of our development processes—Agile on

22 April 2017 waterstechnology.com The Waters Profi le

“Now the developers are in charge of production, and if you start from the premise that production is king—which it is—if you are not open for business, you might as well go home. So there is a cultural program about making the developers realize that when they press that button, this thing is going live.”

the front-end, a DevOps program in the Transparency Rules Thompson feels fi ts well alongside middle, and then internal/external cloud One of the inescapable agents of change Fidelity International’s vision. “When on the back-end. So my dream is that if across the capital markets in recent years you talk about Mifi d II, it’s about client any of the businesses have an idea on the has been increasing levels of regulation, protection, and we want more of that; we Monday, we can go live on the Friday.” and with Mifi d II set to land in Europe don’t want more bureaucracy,” he says. “It The fi nal stream of Fidelity’s at the start of next year, that trend won’t may cost us money, but if we can improve program is optimizing its support struc- be diminishing any time soon. For his the client experience through automa- ture, which Thompson describes as part though, Thompson seems relaxed tion that’s a good thing.” very silo-driven. Although that might about Mifi d II’s arrival. While he says the Protecting client data and trans- work well for the end-client, backed up fi rm has put a lot of work into its prepa- parency are key elements of the by a production incident record that is ration and has taken the issue as seriously challenge for Thompson, both in the “second-to-none of anywhere I have as it possibly can, he’s not concerned in operational and technology senses, ever seen,” it’s also an expensive model the way many of his asset management and as such, cyber-security is one of to maintain. The goal, according to counterparts seem to be. his top priorities. He says that while Thompson, is to create global syner- “The approach to Mifi d II has been investment banking organizations gies across the organization’s back-end to decompose every part of it and build have wised up to the threat posed by while maintaining the level of its client it into every part of our normal change cyber criminals, it took several scares support at the front. programs, not run it as a separate thing, for them to adopt security as a matter It’s a large body of work to undertake because that never works,” he explains. of genuine concern. simultaneously; however Thompson also “Therefore, it is a program that is run Now, asset managers are also on the highlights that at the root of it all is a centrally but devolved into the busi- target list and like many of his counter- cultural change that must be embraced nesses and the technology behind that. parts, Thompson takes the issue seriously. for success to be realized. I’m very comfortable. It’s a big change, The fi rm collaborates on cyber-security “Now the developers are in charge but with enough notice period, time to issues with various governing bodies, of production, and if you start from get through it all, and focus, we’re not and Thompson says he would be open the premise that production is king— concerned. I never want to appear com- to greater transparency between asset which it is—if you are not open for placent, but we, as a company, have taken managers on the issue. For his own part, business, you might as well go home,” it as seriously as we possibly could to do he says Fidelity International has learned Thompson says. “So there is a cultural what we need to.” valuable lessons on its own technology program about making the developers The thrust of Mifi d II is to increase security systems. realize that when they press that button, levels of both market transparency and “Our approach previously was to this thing is going live.” investor protection, something that make the perimeter bulletproof so no

waterstechnology.com April 2017 23 The Waters Profi le

one could get through, but then we worked out that it is impossible to be IAN THOMPSON bulletproof—someone is going to fi nd a FUNDAMENTAL DATA way in, and it is often through a person Name: Ian Thompson internally clicking on something like spam so that data can be harvested and a Title: Chief Technology & Operations month later they’ve got everything they Offi cer, Fidelity International need to go and steal the crown jewels,” Age: 55 he says. “That is nothing to do with the perimeter. So we assume that we have Hometown: Esher, Surrey, UK always been hacked and therefore we Education: University of are always looking for suspicious activ- Westminster, Mathematics and ity all the time. It’s still reactive, but it is Computer Science reactive right at the source.” Hobbies/Interests: Motor racing, snowboarding, cycling, classic Old and New motorbikes/cars Like many other technology depart- ment heads across the buy side, Defi ning Moment at Fidelity International: “The businesses had Thompson started out on the other lost a bit of faith in technology, and side of the street, cutting his teeth in I came along and started delivering investment banking with roles at UBS, things, which I think is the legacy in NatWest and RBS Financial Markets. my head. People start to listen to you when you do what you say. It It was during his two-year stint at was about putting technology on the ABN Amro, prior to joining Fidelity map as something that people want International as the bank’s global head to talk about and be a part of.” of technology, that Thompson was able to fi rst get to grips with managing a large department and budget. While Fidelity International works with a a consortium. Everyone says it’s the best he says the role of managing the bank’s number of global technology and thing since sliced bread, and it will be, technology was very similar to that at fi nancial services startups, sponsor- but there’s no point in me building a an asset management fi rm, it was where ing an accelerator program based in consortium that might not work. That’s he learned valuable lessons around Hong Kong. Thompson advocates the not my business.” building technology teams. benefi ts these relationships can bring What is his business, however, is “My instinct in investment bank- to an asset management fi rm open to leading Fidelity International’s tech- ing, even from a young age, was to change, particularly when it comes nology forward, and Thompson says build environments where people could to learning about new technology keeping the fi rm nimble is vital to succeed and really work on the cultural advancements and business manage- its plans. While much of the future is aspect to break down the barriers for ment methodologies. clouded with uncertainty for many fi rms people to become collaborative,” he However, this doesn’t mean that he across the capital markets through forces says. “Certainly in investment banking or Fidelity International will be jump- such as political divisions in Europe and that wasn’t necessarily seen as being ing head-fi rst into new technologies North America, Thompson says Fidelity useful, but I think delivery comes simply because the opportunity is there, International is well-placed due to its for free if you have the right group of displaying the kind of restraint that the multi-jurisdictional options, and that his people who enjoy what they do.” buy side is more well-known for when aim to further evolve the organization Both his current role and his it comes to emerging technologies. will be executed by him plugging away previous position with ABN Amro “My take on emerging technologies behind the scenes. are a far cry from Thompson’s days at is to be very prudent—not too much “In fi ve years’ time I want to be able NatWest Markets, where he oversaw a so, but I think we are quite leading- to say that I can’t believe how advanced small team running equity derivatives edge anyway in terms of how we are Fidelity International is terms of its globally and was able to see fi rst-hand approaching some of our development speed and time to market, and people the eff ects of a well-defi ned collabora- processes,” he explains. “We can bring will know that it is technology behind tive eff ort, something he also sees in in talent, which is great, but let’s not it,” Thompson says. “I want people to numerous technology startups today. jump into blockchain and try to build think of us as a large startup.” W

24 April 2017 waterstechnology.com Robo-Advisors

Robo-Advisors Permeate Asian Markets

Robo-advisors are gradually becoming obo-advisory platforms are automate the investing process. This more popular in Asia, especially among gaining steam in Asia-Pacifi c, automation is underpinned by arti- R and might prove a disruptive fi cial intelligence (AI) techniques, retail investors. While it will take some force to the asset management indus- in particular machine learning and time, these advancements—and the try in the region in the years to come. natural-language processing (NLP). technologies that underpin these And while the growth in this sector is If this trend continues, it will platforms—are likely to seep into the being driven by retail investors, from only be a matter of time before institutional space in years to come. a technology perspective, it will seep institutional investors show more into how asset managers deal with interest in being part of the action. Wei-Shen Wong speaks to several fi rms institutional clients. At the worst, these platforms can in the region to discuss how they’ve A primary reason for this trend serve as models for how buy-side built out their robo-advisory platforms is the growth the region is seeing in fi rms will interact with their insti- and what that could mean for the buy investable wealth. BI Intelligence tutional clients going forward. expects the region to record $2.4 According to consulting fi rm side going forward. t r i l l ion i n r obo - a d v i sor y a s set s u nd er PwC, global assets under manage- management by 2020. These plat- ment—including robo-advisory and forms are becoming more popular traditional asset management—are among retail investors because they estimated to hit $101.7 trillion by

waterstechnology.com April 2017 25 Robo-Advisors

2020, from $63.9 trillion in 2012. ment in more complex products. ity advice and fi nancial products. Of this, Asia-Pacifi c assets under They customize savers’ investment This is where robo-advisors play a management (AUM) will take up portfolios in a way that is simple, vital role, says Leo Chen, head of just under 16 percent of the total, low-cost and objective. As interna- Asia for vendor Calastone. This is compared with 12 percent in 2012. tional fi nancial institutions fi nally particularly in line with the rise of Additionally, high net-worth indi- overcome the diffi culties lingering the middle class in Asia. In China, viduals (HNWIs) in Asia-Pacifi c are from the fi nancial crisis, they are it’s anticipated that in 10 years there estimated to account for 29 percent focusing on wealth management. will be 300 million people classifi ed of the global total in 2020, up from Asia’s growing wealthy are a natu- in this category. “They will have 24 percent in 2012, while the mass ral destination, and robo-advisors a money to save and invest. Digital affl uent in the region will see 9 per- Artur Luhaäär natural distribution tool.” and mobile technology will also cent growth in that timeframe. Smartly drive this in China and in the rest of PwC writes in its A Brave New Robots vs. Humans Asia,” Chen says. World report that between 2010 and One of the factors supporting the One of the main arguments 2020, more than 1 billion additional rise in popularity of robo-advisors for investing with robo-advisors middle-class consumers will emerge is that minimum investment fi gures versus traditional asset managers is globally, representing the largest are a lot lower than the amounts that the latter have been unable to single-decade increase in custom- required to invest with a traditional outperform their benchmarks after ers. By then, Asia will have replaced asset manager. A traditional asset fees, according to Artur Luhaäär, Europe as having the largest middle- manager would not target house- co-founder and CFO at Smartly. class population. holds primarily because the human “For the past eight years, the Standard Chartered, in its Asian cost of delivering advice is high. simple passive portfolio has out- Asset Management’s Infl ection Point The infrastructure was built for performed an active fund,” he says. report, published last year, expanded high-value, low-volume investments “In Singapore’s case, we off er a on that: “Robo-advisors might and not vice-versa. Still, the average digital solution that can be set up encourage longer-term invest- retail investor needs access to qual- within minutes, is hassle free and

26 April 2017 waterstechnology.com Robo-Advisors

for a fraction of the cost of existing solutions. In addition, we’re fully “With the rise of robo-advisory, asset transparent about our costs and managers will be able to interact with their investment methodologies. There are no upfront fees and you only clients directly. Asset managers may only pay for the time you have invested have around 100 traditional B2B clients; by your money. It’s also important to expanding into retail, they can grow that base mention that we do not receive any to include 20,000 B2C clients. This is where commissions from the products we sell, so we are independent to pick the new challenges come in.” Leo Chen, the best products for our customers. Calastone This cannot always be said about fi nancial advisors.” Smartly charges its clients a 0.7 percent fee, whereas average man- agement fees in the industry range vices. Those two things are separate, app stores and to all devices very between 2 percent and 3 percent, even though they share common fast,” Roll says. “This way it is able annually. Smartly’s service is only ground,” says Cedric Roll, CTO at to interact with the user experience available to Singapore investors and 8 Securities. “Cognitive services are and get clients’ feedback, change the employment pass holders. However, it more along the lines of creating that application and then release it with- aims to expand its reach to Southeast human relationship like recogniz- out having to develop it in C or Java Asia and is planning on making its ing voice, understanding texts, and or any other crazy language—one platform available in Malaysia. extracting sentiments from that— source code, all the channels.” basically replicating those human The application uses the Incorporating AI interactions. Machine learning is architecture of Microservices, a Hong Kong-based robo-advisor 8 all about resolving a problem by recent architectural program for Securities created an app, dubbed predicting an outcome based on past applications, which serves the user Chloe, with the aim of replicating interaction or past data that we can interface. 8 Securities also inte- the whole process of an investor collect.” grated with third parties, allowing walking into a bank and sitting down He adds that using machine it to take content and services and with a relationship manager, but learning within Chloe paints a then build within Ionic Material doing that digitally. “If you have better picture of how achievable to create a consistent experience a robo that still requires you to go those goals are by looking at what across all touch points. and see someone to complete the others have realistically achieved. 8 Securities is looking at using investment process, that’s not a robo “If you are looking to save for a diff erent services like Python to be anymore,” says Mikaal Abdulla, property, we are going to look at the able to leverage its machine-learn- CEO at 8 Securities. property market in Hong Kong and ing algorithm and do it internally. But how exactly does a robo- we’re going to give you some con- Roll adds that the company is advisor platform work? What text on what the property market in working with key partners includ- technology is used to automate the Hong Kong might be. We will ask ing Microsoft, and has spent time investment process? Abdulla says you what your income is and based developing prototypes together. Chloe gathers a lot of data from on that income, this is the type of “We have been using their cogni- potential investors, allowing it to mortgage you can aff ord, and so on. tive services for building a chatbot predict a person’s investment goals That then becomes real and local as to interact with the client. If we based on how they answer a few well. We are looking to do that for move forward with that, clients simple questions. all other goals too,” he says. will be able to interact with Chloe “We have the persona— 8 Securities’ application was via Skype, Messenger, etc., and we Chloe—and fi nancial plans based developed using Ionic 2, an open- will be able to guide them using the on people’s life events and also the source software development kit. “It chatbot,” he says. The fi rm is also ability to connect with them using allows us to develop the application in talks with Google and Amazon machine learning and cognitive ser- once and then release it across all the for potential services.

waterstechnology.com April 2017 27 Robo-Advisors

Existing clients now interact which positions it needs to hold as a terms of fi nancial wellness. “We are through the app with 8 Securities’ company, although that is manually looking at fi nancial wellness of an customer offi cers. The chatbot will done on an hourly basis with bro- individual in the broader sense and use a natural-language processing kers buying stock on behalf of the that includes their health and well- engine that will extract intent and company. being,” he says. tag topics of conversation the client “That’s quite diff erent from what had with the bot, although it has yet other companies are doing, and cer- Challenges Still to set the chatbot’s dialogue fl ow. tainly here in Singapore where they Although more robo-advisory plat- are interacting with a custodian, forms in Asia have been popping up, New Exposure which is interacting with a stock it is still a relatively new concept. In May this year, Farringdon Group, Cedric Roll broker. The other reason we do Before catching up with the AUM of based in Singapore, will launch Asia’s 8 Securities that is that we can cut the account Western robo-advisors, the investing fi rst Sharia-compliant robo-advisor, minimums much lower than what public needs to become comfortable named Algebra. It will launch ini- any custodian would accept,” he with the concept and existence of tially in Malaysia with a minimum says. “Like the custodians here in robos and then to the benefi ts, says investment of $200 per month and Asia, there’s limited choice. With a Charlie O’Flaherty, partner and head will off er users one of fi ve diff erent segregated custodian account, they of digital strategy & distribution at risk-weighted strategies to create probably want a minimum client wealth management fi rm Crossbridge a portfolio of Sharia-compliant size account of $50,000 to $100,000, Capital. funds, says Martin Young, CEO of whereas we are targeting a mini- “Once the effi ciencies are made Farringdon Asset Management. mum $200,” he adds. clear and robos become part of the It will use a platform called Meanwhile, BetaSmartz, a busi- local lexicon, we might experience Replicas from Singapore-based ness-to-business automated invest- an accelerated adoption rate,” he adds. technology vendor Replication ment platform off ering hybrid robo/ However, O’Flaherty says Asia has the Technologies, which will allow it to human advice, uses an open architec- luxury of being able to learn lessons track the top 10 fund managers in the ture in its platform. This allows cli- from other markets. “For instance, US to create portfolios for Algeb ra ents—banks, private banks, fi nancial many of the initial robo platforms in the users. Young says it is essentially an advisors and asset and fund manag- US and Europe employed a more pas- algorithm that identifi es which stocks ers—to customize everything from sive approach to their portfolios. When fund managers are overweight in. their risk profi le through to execution we built Connect by Crossbridge, we The algo is used to determine which and trading, as well as portfolio con- envisioned a platform that would uti- stocks they eff ectively hold and which struction and asset allocation coming lize technology to enable an intuitive ones they hold purely for diversifi ca- from clients. means of actively managing globally- tion purposes, he says. John James, founder of BetaSmartz, diversifi ed portfolios,” O’Flaherty says. “The way we’ve designed this says what makes the platform stand Connect serves accredited inves- thing is unique, but it’s unique out is that it uses much more “deep tors living in Singapore, including US by being light on the tech side in data” to advise clients than most robo expat investors, whose net personal terms of execution,” Young says. platforms. “That ranges from govern- assets exceed $1.4 million or whose “Because we run it internally, and ment data to private sources and also income over a 12-month period is not we are licensed to do that in the data shared by the client,” he says. less than $214,000. “We’ve also taken a same way that a bank is, we don’t “We do things like allow the client to leaf from some of the more successful need to communicate with other aggregate their third-party accounts advisors overseas to introduce factors people’s systems directly. We have so that we have a bigger picture of like goals-based investing, which gives an algo that determines our hedging their wealth,” he says. investors a much greater degree of position in terms of how much stock BetaSmartz also uses machine portfolio customization to suit diff er- or how many assets we have to buy learning and natural-language pro- ent investment needs.” across the entire book for everyone.” cessing in its advice delivery. James There are other factors that He says the company still uses adds that it is now looking at poten- could hold robo-advisors back, notes humans to oversee the algos and Charlie Farringdon’s Young. For example, O’Flaherty tially integrating certain Internet of there is still some human interven- Crossbridge Things (IoT) technologies around Asia is a fragmented marketplace and tion. The internal system shows Capital the advice it delivers, particularly in there is a lack of choice in terms of

28 April 2017 waterstechnology.com Robo-Advisors

asset management tools and quality have. “Asset managers have tradition- sider building an internal, private assets. “We also don’t have a massive ally relied on distributors who hold cloud to test models on, much less selection of exchange-traded funds relationships with clients. The current turn over critical data to a third- (ETFs),” Young says. market model presents challenges to party cloud provider. And fi ve years Particularly for those off ering the asset managers on two fronts,” ago, while cloud adoption started a white-labeled robo-as-a-service, Chen explains. to increase rapidly, public clouds the issue for them is in terms of A consequence of this is that asset were shunned. Now, more and more custodians, which expect high fees. managers will have to rethink their institutional asset managers are put- “Some of them have expense ratios client servicing models, including ting their information in the cloud of 1.5 percent, which for us is high. direct customer service and know you using and the For a robo-advisory to be successful Mikaal Abdulla customer (KYC) functions, which Google Cloud Platform. Meanwhile, here, it needs to be 0.7 percent or 8 Securities can be quite costly. “In the fi ntech on the retail side, all those milestones lower, including ETF charges and age, young consumers seem more were hit far sooner than the industry custodian charges. That seems to be interested in going directly to the has witnessed on the buy side. quite diffi cult to achieve in Asia,” he source, getting advice and purchasing Similarly, while robo-advisory adds. For this reason, Young says 90 investment products straight from the services are currently the domain percent of robo-advisors will strug- manager,” Chen continues. “With the of the retail asset management gle to generate profi ts because they rise of robo-advisory, asset manag- market, expect to see some of those would need $100 million in AUM ers will be able to interact with their platforms and their underlying just to break even. clients directly. Asset managers may technologies—machine learning only have around 100 traditional B2B and natural-language processing, for Tech Revolution? clients; by expanding into retail, they example—adopted by institutional Even though Asia has a lot of catch- can grow that base to include 20,000 organizations to improve their invest- ing up to do in terms of broadening B2C clients. This is where the new ment decision-making, enhance their these outlets’ appeal, it has signifi cant challenges come in. They will need mobility, expand their regional pres- growth potential. The distribution to pick up clients’ calls, manage KYC ence, and fi nd new avenues for alpha landscape in Asia is changing rapidly, information and provide retail cus- generation. says Calastone’s Chen. “With robo- tomer services, among other things,” The retail banking industry has advisors coming into play, a higher says Chen. traditionally outpaced the insti- level of automation in fund transac- tutional market when it comes to tion is necessary. The robo-advisory The Way Forward innovation. But as European and model is a self-service model. After One needs only to look at the adop- North American fi rms look to fi nd advice is given and a fund is selected, tion of cloud technologies to see how new investment opportunities in the the purchase of the fund needs to be the robo advancement in the retail Asia-Pacifi c region, it will be vital for processed automatically. However, in space could yield major dividends in them to better understand the mar- Asia, many trades are still processed the institutional asset management ketplace as a whole—a marketplace manually,” says Chen. industry. Ten years ago, buy-side that will increasingly make use of But the region is rapidly catch- fi rms were reluctant to even con- robo-advisors. W ing up in fund market automation, driven by cross-border fund “pass- porting” schemes, such as the Mutual SALIENT POINTS Recognition of Funds, a China–Hong Kong joint venture launched by ŘRobo-advisory platforms are create human-like relationships with becoming popular in Asia-Pacifi c, investors. Those can be repurposed the China Securities Regulatory driven by the growing middle class. for the institutional space. Commission (CSRC) and Hong Kong The region could hit $2.4 trillion in ŘFirms looking to break into the Asian Securities and Futures Commission robo-advisory AUM by the year 2020. marketplace will need to be aware (SFC). Chen expects many more of the rise of robo-advisory services asset managers to add robo-advisory ŘRobo-advisors use machine in the region in order to better learning and cognitive services to understand investors’ mindsets and off erings. By doing so, asset managers predict investors’ demands and to how to go about reaching them. will be able to gain direct access to clients, which they currently do not

waterstechnology.com April 2017 29 Shadow IT

Out of the SHADOWS

developer gets a job at The arrangement only lasts so On the surface, the concept of shadow a large, European bank long before one of the developer’s IT seems simple: A project is started A straight out of college. He’s superior’s gets wind of the work he without proper authorization because young and enthusiastic in the way is doing for the MD, which has not those involved want to avoid having most people are when they are just been authorized by the technology beginning their careers. Despite not department, and voices his con- to jump through the various hoops having a strong working knowledge cerns about the relationship to both required to give it the green light. In of the fi nance industry, he develops people. So, was the developer fi red actuality, shadow IT is much more a relationship with a managing on the spot? Was he banished to a nuanced. Dan DeFrancesco talks to director of one of the business divi- dull, boring technology project as executives from across the industry sions of the bank. The partnership is punishment? At the very least, did mutually benefi cial: The MD is able the relationship between the MD about their experiences monitoring— to go to the developer with prob- and developer end? The developer— and creating—technology that is not lems and immediately get solutions, now a co-founder and CEO of a quite out in the open. while the developer raises his profi le New York-based vendor—pauses at the fi rm thanks to his interactions and then smiles before answering with a high-ranking employee. the question.

30 April 2017 waterstechnology.com Shadow IT

“I was promoted,” he says. “The “That’s the purest form of MD of the business said, ‘It sounds shadow IT. This guy has this idea, like we’re doing the right thing No technology executive worth his or her salt and he is neglecting his duties and here. There is nothing to discuss. would hope to have their organization plagued responsibilities and certainly not Let’s move on.’” with technology projects not supervised by putting the eff ort in that he needs to. It didn’t stop there. A few their department, but he or she would also He is going out on a limb with this months later, an all-hands meeting be foolish to ignore the potential benefits great idea, and in the end there is this for the entire IT department was awesome result where they’ve got a called during which the developer’s and innovation those same endeavors could new product or the trader generates superior—whose goal when speak- produce. a lot more P&L and then a cool story ing to the MD was to try to get him comes out of it,” the MD says. fi red—decided to revisit the issue in This is not to say that every front of the entire group. “He called shadow IT story has a happy ending, me out by name as one of the people however. “The other example is the who was setting the standard for person who is working on some- excellence in the organization,” the thing, and doesn’t have something source says. to show for it. Then the end result nology projects run without the is that they just get fi red and no one Double-Edged Sword necessary approval of the overseeing really sees the shadow IT aspect of Therein lies the conundrum that is department. However, the motiva- it,” the source says. shadow IT. No technology execu- tion behind taking such measures A senior executive at a large tive worth his or her salt would to implement technology can diff er exchange group says it’s tough to hope to have their organization greatly. According to one manag- make a distinction about where plagued with technology projects ing director of a vendor based on shadow IT begins and ends because not supervised by their department, the US West Coast, shadow IT isn’t we live in an age where working and but he or she would also be foolish always a matter of front-offi ce folks toying with technology on a daily to ignore the potential benefi ts and circumventing the IT department basis isn’t necessarily just the respon- innovation those same endeavors to get their issues dealt with quickly. sibility of the IT staff . In fact, the could produce. The MD gives an example of executive considers a background In the case of the young devel- a scenario that took place while in coding or an analytical view of oper, the work he was doing working at a large technology fi rm things to be a big positive for can- streamlined a process that previ- also based on the West Coast. His didates who aren’t even applying for ously took seven hours down to colleague was tasked with making jobs in the technology department. one minute. And while his superior sure old application program inter- Where the issues arise with shadow wasn’t pleased the work was being faces (APIs) worked on the fi rm’s IT, according to the executive, is done behind his back, he wasn’t able newly developed platform. when certain boxes aren’t checked. to deny the results. The work, the MD admits, was “I think the point at which a pro- “End-users love cool stuff that dull, so his colleague instead spent ject, whether it’s shadow IT or not, just works and helps them get their his time trying to create a better may become a problem is when the jobs done. This is so common across gaming API, completely neglecting organization and the business starts Wall Street,” the developer says. “IT the work he had been assigned to to depend on that project for mate- organizations need to be way more do. Eventually, higher-ups at the rial results and it may or may not be responsive to the business. That’s the fi rm recognized the fact that he was up to the standards or the robustness problem. The problem is not shadow not doing his work and confronted and resiliency that’s required of eve- IT.” him. However, by that time he rything else,” the executive says. was able to show them the project Understand the Shadow he was working on. The solution Multiple Levels The fi rst thing to do when discuss- didn’t end up panning out, but the When talking about shadow IT, the ing shadow IT is to recognize what concept was innovative enough for severity of the project must be con- exactly it is. At its most basic level, him to get a pass for not doing his sidered. A single Microsoft Excel shadow IT can be defi ned as tech- work. spreadsheet used by one person that

waterstechnology.com April 2017 31 Shadow IT

has gotten a bit out of hand in size is be considered applications in and its information system guidelines. a far cry from an entire platform that of themselves, and data extraction, The executive uses the example of a a portion of the business runs on. A enrichment and production in the general ledger system that is used to C-level technology executive from form of something like a customer develop some risk management on a European bank breaks shadow IT report fi led by the incorrect party. the profi le of a client despite it not down into three layers. The most And while there is an element being a dedicated risk application. prevalent, and least worrisome, layer of risk in both those situations, It’s a convoluted issue, as the actual is what the executive calls desktop- the bank is able to keep tabs on its system is not necessarily a shadow IT centric IT. Over the last 15 to 20 users thanks to a modifi ed Windows project—it’s more a matter of how years, tools on the desktop have operating system it uses on all its it’s being used. matured to the point where users computers that signifi cantly limits “Is it totally shadow IT or is it can be creative, to an extent. what users can do. simply that the expectation from “There are a lot of things in the “You cannot go out into the the top-down approach of what the desktop that the user does, which internet and download an applica- business process should follow is we want to do as an IT organiza- tion that you would have bought actually not what happened in real tion. There is a shadow IT aspect to online. You are not administered life?” the executive says. “There is it because of how much is done by to download or install any software. a shadow IT aspect of it, but it’s not the user without the normal IT pro- Your CD is not available. You can’t necessarily because I’ve built systems cess of management,” the executive plug into a USB port unless you give that nobody is aware of. I reused says. “It’s also less worrisome for an permission to kill your fi rst born or refocused my business process IT organization because it does not child,” the executive says. diff erently.” really change much.” The second layer, which is more The executive says these issues serious, but less prevalent at the fi rm, Cloud Conundrum usually crop up in the form of massive is a business process built on an IT The fi nal level, and the one that Excel spreadsheets that can almost system that is not operating within can have the most negative impact

32 April 2017 waterstechnology.com Shadow IT

on a fi rm, are projects put together SALIENT POINTS using cloud-based technologies. The executive says that his fi rm doesn’t have many, if any, issues in this Ř6KDGRZ,7FRPHVLQYDULRXVIRUPVDQGLV LQWKHVSDFHGLVDJUHHDVWRZKHWKHUWKLVLVD QRWDOZD\VDPDWWHURIIURQWRIƂFHHPSOR\HHV JRRGRUEDGWKLQJIRUWKHLQGXVWU\ area, but it’s one to keep an eye on WU\LQJWRFLUFXPYHQWRYHUVLJKWIURPWKH,7 because of the rapid evolution taking GHSDUWPHQW Ř7UDQVSDUHQF\EHWZHHQEXVLQHVVDQGWHFK QRORJ\GHSDUWPHQWVLVLPSRUWDQWWRDFKLHYH place in the software-as-a-service Ř&ORXGFRPSXWLQJKDVPDGHVKDGRZ,7 DEHWWHUXQGHUVWDQGLQJRIHDFKRWKHUőVQHHGV (SaaS) space in recent years. As these SURMHFWVHDVLHUWRVSLQXSTXLFNO\([HFXWLYHV DQGWRDYRLGVKDGRZ,7DOWRJHWKHU technologies continue to grow at capital markets fi rms, it’s become easier for users to implement a plat- Keeping it in the Shadows as a member fi rm are entitled to use. form or solution without properly Not all shadow IT projects crop Except you’re automating the access integrating it with the fi rm’s man- up because an end-user or devel- to it and it would be very diffi cult agement information system (MIS). oper wants to avoid having to get for a management team to openly The executive says he worries that authorization from the technology condone that. But at the same time, this will become a bigger issue as department. Sometimes there is a the benefi t to any type of trading banks’ technology departments get reason a technology project is kept operation was massive,” the MD pressured into operating like fi ntech in the dark. The MD at the West says. “It was don’t ask, don’t tell. The fi rms and deliver technology back to Coast-based vendor says that was order comes in to buy 10 terminals end-users quickly. the case while working at the Tokyo for a desk that has three guys on it, “A business can probably mas- branch of a US bank a number of and they are not normally going to sively outsource its IT without years ago. The MD was part of a do that. They are expensive. When any information and just a good team of technologists tasked with asked about it, the answer probably American Express credit card line. scraping data from manual terminals was: ‘Well, these give us an edge. It’s probably the easiest, the most to gather market data that wasn’t You don’t want to know,’ and it was risky, and probably the biggest issue widely available at the time. left at that.” we face in the future, as those ser- The information gathered vices are developing,” the executive allowed the bank to fi gure out where Show Value says. “I am more worried about IT the Nikkei index would open on the The head of technology at a North itself exploding its own process by Tokyo Stock Exchange (TSE) and American bank says the most impor- quickly procuring some IT capabil- how many buy or sell orders could tant question every fi rm needs to ask ity and not maintaining the MIS. be placed without impacting the itself when dealing with shadow IT You become a shadow of yourself.” open. The bank could also purchase is what problem it’s trying to solve. If Not everyone is as worried, futures on the Singapore Exchange, a fi rm is clear about what it’s trying however. In fact, the executive at the which opened fi ve minutes before to achieve, it will alleviate issues exchange group views the growth of the TSE, to capitalize on what that can crop up when the business cloud computing as a good thing. would sometimes be huge disparities and technology departments work Any technology that empowers in the market. together to come up with a solution. non-programming users to get their Although legal, according to Secondly, the executive says that jobs done without requiring a build the source, it was not something the when it comes to shadow IT, the from the technology team is viewed fi rm wanted to openly publicize. best defense is a good off ense. As as a good thing, he says. And while the head of the branch long as a fi rm’s IT department can “The technology talent is scarce, likely didn’t know what was going continue to provide value, there is so I don’t view it as threatening. I on—beyond the fact that extra air no need for shadow IT, according embrace it. If we can fi nd a solution conditioners had to be installed to to the executive. “What’s the value that is quicker to market, solves the keep all the terminals cool—the we as a technology organization problem, and is not our core com- level below him was likely aware provide to the business and can look petency, then why not use it rather that automating this process gave the ourselves in the mirror and say that than build it,” the executive says. fi rm a huge advantage, the MD says. we off er?” the head of tech says. “As “Our preference is to build, but if “You could say that none of long as you’re doing that, then why it’s not our core competency, why this is really necessarily illegal. would you try to do something on are we spending time on it?” You’re using information that you the side?” W

waterstechnology.com April 2017 33 CRM

CRM PRACTICES Under Scrutiny

Existing in the shadow of Mifi d II, the or those familiar with processing and use of personal data new General Data Protection Regulation European laws and culture, the was less invasive and less structured F introduction of the General than it is now. Although in a directive is an upcoming European mandate Data Protection Regulation (GDPR) format, which translates into a formal for the protection of personal data. should come as no surprise. Privacy suggestion and not an obligation to However, the fi nancial services world protection is not taken lightly—it is member states, it proved to be quite has not yet realized the extent to one of the primary values featured in popular to most local lawmakers. the European Charter of Fundamental To date, the fi nancial markets have which it will be affected. Most notably Rights. Therefore, the EU was quick enjoyed a loose relationship with it, in the fi eld of customer relationship to develop a relevant legislation, but this is about change. management systems, the GDPR will which was shaped and came into force defi ne new ways on how fi rms should 22 years ago, in 1995. Meet the GDPR process their clients’ data. Against this The Data Protection Directive Fabio Polverino, legal offi cer at the (no. 95/46/EC)—the GDPR’s prede- European Data Protection Supervisor, prism, Aggelos Andreou speaks with cessor—was a legislative text designed the Commission’s regulatory body key players in the CRM fi eld and the to meet the needs of consumers, cli- created to coordinate and oversee European Commission’s GDPR team. ents and citizens across all industries the GDPR, tells Waters that the leg- and countries, at a time when the islation needed to adjust to the new

34 April 2017 waterstechnology.com CRM

technological reality. “Our relation- ship with personal data has changed “Wealth management firms want their signifi cantly,” he says. “There are CRM to include prebuilt integrations to the structures in all sectors that process personal data on a professional and systems and data sources they rely on. All routine basis.” of these have to do with real-time access Polverino says the evolution of to custodian data view alerts and account technology has complicated the issue profiles, and integration with portfolio and and the European Commission felt that it had to intervene with a new marketing automation systems.” Bill Rourke, regulation. After four years of discus- SS&C Salentica sions, the regulation was adopted in 2016 and will enter the statute books on May 25 next year. “This regula- tion is much more detailed; it is a set of rules that can directly be applied at a ness in their fi rms,” he says. “They “No decision will exclude human national level, without further imple- have already examined what personal intervention,” Polverino explains. mentation,” Polverino explains. “The data they hold, assessed where it came “If there is an automatic assessment great benefi t is that they take into from and who they are sharing it with, and processing of personal data, the account all the problems that have and have started working through a individual will always be entitled to emerged since the directive entered process of reviewing their data protec- rectify the data concerning himself into force, so it’s a big step forward.” tion policies and procedures.” or herself and intervene to provide The wide range of industries additional information or require aff ected by the regulation, in con- Key Points human intervention.” junction with the previous state of the There are three key points within directive, has led market participants the GDPR that apply to the fi nancial GDPR on CRM to regard the GDPR as subordinate markets: accountability, profi ling and For most European capital markets to Mifi d II for which limited action human intervention. According to fi rms, the GDPR should translate all is required, while they are still trying Polverino, the accountability fi eld is of these compliance drivers into their to understand the implications of its viewed by the EC as one of the most CRM systems, where all clients’ data implementation. “We are still in the signifi cant parts of the entire regula- is processed, managed and stored. phase where small and medium-sized tion. “What is certain at this point Underwood says that the industry businesses are trying to understand is that one of the major changes that should consider the GDPR’s eff ects how they should organize,” says the regulation introduces is that it on the future of their business, as Polverino. “The major challenge for increases accountability for whoever failure to comply could cost them them is to internalize the rules. They processes personal data,” he says. up to €20 million ($21 million) or 4 see it as a new compliance eff ort; “Entities that engage in data process- percent of their annual turnover in sometimes there are complaints that ing should equip themselves with all terms of fi nes. “Smaller or less organ- there is already enough legislation and the legal and technology structures to ized fi rms will be impacted the most they don’t need additional rules.” handle personal data.” because they might not be entirely Alan Underwood, managing The EC rule on data profi ling compliant with the existing directive director for the UK and Europe at stipulates that fi rms should develop and have more ground to make up,” Satuit Technologies, a London-based the appropriate methods on profi ling he says. “The consequences are now provider of customer relationship their clients’ data and process them more severe, and for them, there will management (CRM) software to the accordingly. “There are provisions in be a huge compulsion to get their investment management industry, says the GDPR that regulate both profi l- house in order.” that large buy-side fi rms have already ing and automated decision-making,” Underwood adds that fi rms included GDPR in their compliance says Polverino. with an international reach will projects, along with Mifi d II. “The Also, one of the fundamental need to work even harder to meet larger clients are already looking at aspects relates to clients’ consent as the new demands. “The provisions GDPR and have already built aware- to how their data can be managed. on cross-border data transfers are

waterstechnology.com April 2017 35 CRM

more onerous and so pan-European CRM Transformation Bill Rourke, general manager businesses will have to think more The GDPR comes at a time when at SS&C Salentica, adds that the carefully as to how they manage the CRM landscape is changing in integration of CRM systems into their data,” he says. “In some ways, terms of how asset managers use asset managers’ general workfl ows the harmonization of data across client-related information to gain so that client data is more read- member states is helpful, but in other insights into their needs with the ily shared across the business has respects getting to that harmoniza- goal to provide them with better, become increasingly popular. SS&C tion will for many require a lot of more targeted services. Such infor- Technologies acquired Salentica, a compliance work.” mation also allows buy-side fi rms CRM platform provider, late last The retail asset management to build up detailed profi les of their year, folding it into SS&C’s Black industry will be similarly aff ected by clients so they can off er ancillary Diamond wealth platform and Alan the GDPR, owing to the quantum of Underwood services to them that they wouldn’t integrating it with other existing personal data being mined and man- Satuit be in a position to ordinarily. SS&C off erings, including APX, aged. “Many of the asset managers in Technologies Underwood identifi es the use Axys—both formerly part of Advent retail are using multiple channels of of data analytics as a big push in Software—and the vendor’s Global technology and social media to reach the CRM market. Also, he says, Wealth Platform. “Wealth man- out to consumers, resulting in the the visualization of these analytics agement fi rms want their CRM to processing and tracking of personal is in high demand by the majority include prebuilt integrations to the data, including behavior and prefer- of Satuit’s clients. “There is a trend systems and data sources they rely ences,” Underwood says. “They to represent the data in chart format on,” he says. “All of these have to do not only have to deal with GDPR graphically,” he says. “You can click with real-time access to custodian compliance around data transfer and on a chart and then further slice and data view alerts and account profi les, audit, but also very much in relation dice the data, and the chart will and integration with portfolio and to profi les and consent.” dynamically update.” marketing automation systems.”

36 April 2017 waterstechnology.com CRM

The Basics the leakage of sensitive and personal make sure that your client has a system As with all upcoming regulations, information. The fi rst problem raised in place to capture these communica- there are queries raised by market par- by participants lies within Europe’s very tions and that it’s not silently left up to ticipants, and in this case by the vendor nature in terms of the way it implements you as a provider to satisfy.” community as well, as existing CRM laws. Contrary to Mifi d II, which is a That means that every CRM systems must almost certainly be modi- clear fi nancial regulation, within the provider should assert this in each indi- fi ed to fi t the new data standards. Since GDPR there are no provisions specifi - vidual case and make sure the proper the adoption of the GDPR in 2016, the cally addressing the European capital controls are in place. Meanwhile, European Data Protection Supervisor markets as a sector, while at the same human intervention poses a unique has been approached numerous times to time participants are expected to be challenge specifi cally for vendors. As answer the same questions for diff erent Chris Georgiev fully compliant come May 2018. Georgiev explains, with CRM systems, industries. Polverino explains that there Dynamo That said, fi nancial regulations data can come from an array of sources is one clear obligation, which explains Software across Europe fall under the jurisdiction and individuals might not know their more or less how fi rms should move of the European Securities and Markets data is being stored within a given in order to become compliant: data Authority (Esma), although most retain CRM platform. “There are certain processing. their autonomy in implementing the aspects of the GDPR, such as the right “Processing is a notion that identi- rules depending on the region. If Esma’s to be forgotten and the right to access fi es the use of data, including storing guidance is omitted, how would fi nan- that can become a gray area,” he says. data, using data, communicating data, cial institutions develop a common “If individuals approach CRM provid- and elaborating data from technology,” approach to managing client data in ers and ask if they exist in their system he says. “In order to use or process CRM platform to meet GDPR obli- or even ask to get rid of their data, then that data, the entity, which the legisla- gations? This is a concern that CRM what do you do as a CRM provider?” tion refers to as a “controller,” needs a providers share as well, as they might Georgiev says no one knows the legitimate legal basis, and, besides that, have to modify their platforms and answer to that question yet—not even it needs a purpose for its use, and that systems for each of their clients. the European Commission—and how use needs to be assisted by a number of Chris Georgiev, CTO of to solve it might trigger the most confu- safeguards.” Watertown, Mass.-based Dynamo sion across the industry during the time In the US, this data processing Software, a provider of CRM platforms of implementation. “Right now, as an within CRM platforms is regulated to the buy side, says UK asset managers individual you can go to Google and ask by the Dodd-Frank Act, and while might have diff erent needs compared to them to get rid of your profi le, but can the compliance procedure might seem buy-side fi rms in, say, the Netherlands. you do it with CRM providers when diff erent, it can be used as a guide to “If you get a fi rm from the UK, you those providers are not the ones gather- complying with the GDPR in Europe. have to bear in mind that they will have ing the data?” Georgiev wonders. “The SS&C Salentica’s Rourke says that to retain copies of all the communica- rule book looks great as a rule book, clients’ data security follows a standard tions with investors for a minimum but when you get to those special cases, procedure when outsourcing to a third of six months,” he says. “You have to that’s when issues arise.” W party. “Firms need to know where their data is and how it is being handled,” he says. “As an example, if a fi rm is using SALIENT POINTS a low-cost consultant, it is possible that ŘThe General Data Protection ŘThe GDPR will mainly affect less they are outsourcing work and access to Regulation (GDPR) comes into organized asset managers, as a fi rm’s client data to off shore develop- force in May 2018, overriding the well as vendors that might need to ers, which may be located in restricted previous directive established in provide modifi cations to their CRM 1995. It affects all sectors within the systems. countries and could jeopardize a fi rm’s European Union, including fi nancial regulatory compliance.” markets. ŘThere are concerns about how institutions could coordinate their ŘCustomer relationship management compliance efforts, while vendors The Questions (CRM) systems are most likely to express reservations as to how they The GDPR is designed to create a bear the burden of the new regula- should react when individuals ask unifi ed data market in Europe, where tion, amid their own changing nature for the right to be removed from in the last couple of years. their system. data would be circulated in a contained and regulated way, protecting against

waterstechnology.com April 2017 37 John Brazier

Will Fractured Europe Be Left Behind in Post-Brexit Order?

John questions the role of Europe within the global capital markets as numerous organizations face an uncertain future, but says consolidation could be the key to keeping up with greater competition from North America and Asia.

he history of Europe off ers up cated technologies for both corporates that change is inevitable and the need to many examples of glorious civi- and consumers, while North America cooperate to survive is more important Tlizations: From the prehistoric is home to the new breed of tech com- than ever. Minoan and Mycenaean peoples that panies, global behemoths like Amazon The ghost at the feast presiding over fl ourished during the Bronze Age, to and Google, that have become part of every European fi rm now is, of course, the sprawling empires of Rome, Greece the capital markets landscape. Brexit. The UK, a nation whose name and the Ottomans that have shaped For their part, some entities have now sounds more ironic with each much of the modern era, the European made eff orts to create organizations passing day, seems to sum up the future continent’s past is about as diverse as it is with the power to rival their interna- of the European continent more than possible to imagine. tional competition, although not all has any other could. Uncertainty is now While the Europe of today bears gone swimmingly. The much-publi- the norm and London faces a diffi cult only a passing resemblance to its his- scramble to hold on to its position as the toric past, perhaps in part due to the go-to destination for new technology creeping force of globalization, a sense The ability to adapt will determine the future fi rms looking to establish themselves in of partisanship and less-than-friendly of many of Europe’s asset managers. the European capital markets space. rivalry has exploded over the course of There is also the impending arrival the last couple of years, as old alliances of Mifi d II, an enormous task for many break down and rifts become wider. So cized and ill-fated merger between the asset managers that are scrambling to where does that leave Europe in terms London Stock Exchange and Deutsche redefi ne their technology stacks ahead of its standing within the global capital Börse is dead in the water, brought low of January next year. While little is and fi ntech markets? by a combination of pressure from the known of how the regulation’s imple- European Commission and unwilling- mentation may be aff ected by the UK’s Same Position ness from both parties to bend on points departure from the EU, asset managers Europe is in much the same position as such as where the new entity would be won’t be aff orded the luxury of taking it has always been. There is no shortage headquartered. anything for granted when it comes of multinational banking institutions Some asset managers are also real- to keeping their trading systems both and asset managers across the region, izing the need to join forces in the compliant and functional. but that sense of solidity based on tradi- face of superior, or at least greater in The ability to adapt will determine tion has slowly been eroded through size, opposition from overseas. At the the future of many of Europe’s asset the emergence of a global trading start of March, UK-based Aberdeen managers. The industry is becom- ecosystem made possible by incredible Asset Management and Standard Life ing increasingly polarized and those advancements in technology over a announced that the fi rms would be without the necessary means to survive relatively short period of time. entering into a merger that would within a changing European landscape, While the European banking create one of the country’s largest particularly under the new Mifi d II and asset management communities investment fi rms, capable of providing regime, may fi nd themselves swallowed have embraced the eruption of fi ntech serious opposition to its international whole. As Aberdeen CEO, Martin in recent years, the region still lacks How will Brexit counterparts. Gilbert, said of his fi rm’s merger with the same technology clout that its shape Europe? While the merger has been under- Standard Life, asset managers are facing For more information and American and Asian counterparts boast; readers’ feedback please mined by doubts from investors, it’s a numerous challenges and any fi rm that join the discussion at Asia, particularly , has long been waterstechnology.com/ signal that the asset management com- denies this is simply putting it s head in buy-side-technology famous for its production of sophisti- munity in Europe is starting to realize the sand. W

38 April 2017 waterstechnology.com Dan DeFrancesco

Learn to Live in the Shadow: Accepting the Existence of Shadow IT

Shadow IT at your fi rm? Dan explains that the only way to properly handle the presence For more information and readers’ feedback of shadow IT at a fi rm is recognizing that it’s likely not going please join the discussion anywhere. waterstechnology.com/sell-side-technology

ant to know the best way Teenagers have sex. Educating them The better a person understands to shut up a technology on the ways they can do so safely—as technology, the more likely they are to Wexecutive? Simple. Ask opposed to ignoring that option try and go at it alone, without proper them how they handle shadow IT at altogether—seems like a much more supervision, or ask for some help from a their fi rm. As you might have seen, I logical choice. bored developer. It’s not just the people wrote a feature this month looking at That’s why I don’t buy the philoso- who are changing. The tools they have shadow IT. It’s a unique topic, as it’s one phy, which was pitched to me by plenty around them are evolving as well, that plagues nearly every fi rm to some of executives I spoke to, that shadow making it much easier for them to spin degree—whether they’d like to admit it IT can be avoided altogether if the or not—but it’s not an issue many tech- organization has good communication, nology executives are keen to discuss. is transparent, and does its job well. The story is one I’ve been work- Would a chief information security With all of those factors leading to an ing on for months on the side because offi cer (CISO) not have a plan in place increased presence of shadow IT, why of how diffi cult it was to gain traction for what steps should be taken if his maintain the position that it is non-existent? with it. Even when bringing it up at our or her fi rm is hacked? Of course not. conferences, I was often met with blank So why have the same approach when a solution up quickly. The increased stares and brief answers before the topic dealing with shadow IT? adoption of cloud technologies at was quickly changed to something fi nancial services fi rms has opened the more palatable. Changing Times door even wider for employees outside And that is the biggest issue with Still not convinced shadow IT is some- the tech department to create and shadow IT: executives’ insistence that thing you should worry about? Even if implement their own solutions. it does not exist and/or will not impact your fi rm really is the diamond in the With all of those factors leading to their fi rm. rough and completely free of shadow an increased presence of shadow IT at IT, its chances of maintaining that fi rms, why continue to maintain the Acknowledge the Issue environment will only get increasingly position that it is non-existent? A C-level technology executive out- diffi cult in the coming years. I understand that it’s not nec- right refusing to believe shadow IT is Let’s look at the type of employees essarily something you root for. present at his or her fi rm can only lead entering the work force now. Most Shadow IT projects have caused to bad things. The fact is that there young people, regardless of whether major issues for fi rms, espe- are likely to be at least some projects they are planning on getting into IT or cially when the ones leading being worked on that your technology not, have a strong grasp of technology, it leave the company for department is not aware of. and many know how to code. another fi rm, which is often I’m not saying every fi rm has It’s not restricted to just the youth. the case. But to choose to mission-critical platforms running Those later in their careers can also pick completely turn a blind eye unbeknownst to the tech team, but up technology skills quickly thanks to it seems foolish. Better to to operate under the belief that all the to the number of classes and tutorials get out ahead of it than company’s technology is run entirely available online for little to no money. get left behind. W under the IT department seems a bit A person with enough motivation, naïve and reminds me of supporters of and a little bit of time, can quickly abstinence-only sex education. Sure, in learn skills traditionally believed theory the best form of contraception is to reside solely in the technology abstinence, but that’s in an ideal world. department.

waterstechnology.com April 2017 39 Emilia David

Legacies Updated

People talk about legacy infrastructure as if it is a roadblock to innovation, but Emilia says that learning about code modernization can help place it in a different light.

ost conversations I have with through them, so it is understandable lelization of processors. Joe Curley, technologists end up with why C-suite executives are reluctant to Intel’s senior director for its Code Msomeone mentioning the change them. It is still ideal to replace Modernization Organization, says it phrase “legacy infrastructure.” Often, components in technology infrastruc- off ers a cost-eff ective way for fi nancial it’s with a sigh of resignation, as if there tures every few decades or so, but code services fi rms to bring out the best are no ways that legacy infrastructure modernization does make a case for in the equipment they already have. can be improved, and it’s the one thing retaining old servers. Changing serv- “Banks look for the most eff ective way stopping progress from occurring. ers can be cost-prohibitive and there to deliver performance,” Curley says. That’s what made code moderniza- will probably never be a time when it “We think this is a less expensive way tion such an interesting topic for me to becomes aff ordable and easy to manage. to get the most out of your existing write about this month. I found myself infrastructure.” asking about legacy infrastructure in Still, the experts I spoke to for my a diff erent way. Code modernization The cloud is one possible solution in the feature on page 16 point out that some and parallelization are means to update fi rms can still be skeptical when it comes battle against aging architecture, but current servers used by fi nancial ser- to the cost benefi ts of code moderniza- vices fi rms. The processes update code security issues remain. tion. For Kamisarov, this is a matter of and allow tasks to fl ow through all of pointing out the competitive advantage the available cores in servers, taking Oleg Kamisarov, senior vice of having a fully optimized technology advantage of all the computing power president and partner at technology backbone. Curley, on the other hand, available. consultant, DataArt, says projects like believes code modernization lessens the Code modernization advocates code modernization help set aside need for constant code updating, usher- retaining legacy infrastructure rather upkeep costs for existing systems. ing in cost benefi ts. than the belief that it should be replaced “Code modernization is just one side Of course, code modernization is if the cost is not prohibitive. Many of of the equation,” he says. “Legacy not the only way to fully utilize legacy the stories we write focus on complaints infrastructure is a big cost, but many of infrastructure that might have gone from industry practitioners about how these enterprises are reluctant to move unused. Some existing architecture, diffi cult it is to deal with aging archi- to the cloud and have to keep updating even if fully parallelized, is simply tasked tecture. Code modernization off ers a enterprise architecture.” with doing too much. For that reason, way of keeping it in place by ensuring Kamisarov notes that capital mar- innovation continues. The cloud is one that the infrastructure can still handle kets fi rms turn to code modernization possible solution in the battle against the data and analytics needed by the not just to avoid implementing new aging architecture, but security issues business to trade or meet regulatory servers, but also because if the code is remain. However, fi nancial services mandates. not updated it might lead to a lack of fi rms tend not to upload all of their external support for fi rms reliant on old data into the cloud, preferring instead Patching and obsolete technology. to keep the most sensitive information Legacy architecture often needs patch- Intel runs a program helping in grounded servers for security reasons. ing or placing newer technology on How can fi rms organizations and developers learn best Kamisarov says not all fi rms are ready top of it in order to manage certain tackle legacy IT? practices for code modernization. The to completel y move to the cloud either, For more information and specialized tasks. But old servers are readers’ feedback please program off ers a basic introduction because of the cost involved or because join the discussion at the backbone of many fi nancial ser- waterstechnology.com/ into code modernization and provides of security concerns. Either way, legacy buy-side-technology vices fi rms, with everything running users with tips for more effi cient paral- infrastructure is here to stay. W

40 April 2017 waterstechnology.com Aggelos Andreou

If It’s Europe, It’s Mifi d II

Is Europe ready for Mifi d II? When it comes to complying with the upcoming Mifi d II regulation, For more information and readers’ feedback Aggelos explains that if any part of any trade has anything to do with please join the discussion Europe, it is subject to the Directive. waterstechnology.com/sell-side-technology

n March 23, Waters held a con- and guidance around certain areas tries. A good strategy, for example, is to ference on Mifi d II, at which currently creating confusion. He said separate the matching regulations that OStephen Hanks, responsible that by the end of May, Esma would share the same processes and objectives for co-ordinating the revision of Mifi d release a new Q&A paper on Mifi d from the ones that share few or no II at the Financial Conduct Authority II compliance, while the FCA would commonalities across jurisdictions. (FCA), delivered a clear message: The release its own paper sometime this On a separate note, I have noticed a market has had enough time to take month. pattern among the many questions asked care of their compliance obligations; around Mifi d II. There is always a ques- there will be no “special” favors and no To-do Lists further delays. During her speech, Meredith Gibson, Meanwhile, a poll taken at the event director at Meredith Gibson Advisory, revealed that 65 percent of attendees, stressed the importance of speeding up Irrespective of the technicalities of the representing major buy-side and sell- the processes of putting together and Directive, there is no reason why anyone side fi rms, believed that there will still following a full compliance strategy, should be trying to find a way out of it. be challenges to overcome when Mifi d given that there would be signifi cant II comes into force on January 3 next complications for anyone who might tion about falling under the scope of the year. Only 25 percent claimed that they fall behind in terms of their schedule. European regulation if for any reason a would be fully compilant. Her point was later reiterated by Olivier trade involves companies, products or A compliance manager at a buy- Rose, head of projects and international executions that take place outside of the side fi rm said the industry fears “plenty data management production at Societe European Union. My understanding is of fi nes” and warnings issued by the Generale. that if in any part of a trade workfl ow, authorities during the fi rst few months. Rose said certain procedures could from pre-trade agreements to post- He said his fi rm’s compliance team take some time to materialize. For trade clearing and settlement, includes had attended every conference and example, getting legal entity identifi ers, the word “Europe,” then it is likely workshop in London and elsewhere which under Mifi d II will be manda- subject to Mifi d II. in Europe to get a comprehensive tory for all fi nancial transactions, had Irrespective of the technicalities understanding of the various regula- proven to be a very lengthy procedure. of the Directive, there is no reason tions—from Mifi d II to Solvency II—so He said that there are only a few LEI why anyone at this point should that the fi rm could prepare accordingly. providers in Europe that have to satisfy be trying to fi nd a way out of The FCA’s Hanks explained the number of received applications complying with it. Regulations that the 700 pages of the European from companies across the market. are intensifying in number and Securities and Markets Authority’s Designing a Mifi d II compliance reach—especially across (Esma’s) regulation are not designed to strategy is not a trivial undertaking. Asia and — destroy companies but rather to protect Beate Born, global Mifi d II project which will inevitably lead the market and its investors. He said that lead at UBS, provided some useful to a unifi ed and global there is fl exibility in terms of how fi rms insight during her presentation into regulatory landscape in can meet the requirements and that if how the Swiss bank is preparing for the long run. W one of them has legitimate alternatives, the new regulatory landscape. She it is allowed to use them. said that for a global bank, there are He also referred to specifi c dates a lot of diff erent issues to juggle, and deadlines when the regulators specifi cally because it has to comply will be able to provide explanations with various rules in diff erent coun-

waterstechnology.com April 2017 41 Human Capital Human Capital

AIM Software Appoints Asset Control Taps Appleby which he also served as a senior broker Raman CEO for Sales Head Role at interdealer broker Viel Tradition, Vienna-based enterprise data Data management solutions provider where he led the growth of the fi rm’s management solutions provider Asset Control has hired Gary Appleby short-term interest-rate derivatives AIM Software has appointed Gayatri to lead its EMEA and Asia-Pacifi c desk. Raman as its CEO. Before joining sales teams. As head of international Nasdaq is an investor in Hanweck, AIM in 2015, Raman was previ- sales, Appleby will be responsible following its acquisition of the ously sales head for capital markets for managing and growing existing International Securities Exchange, at Capgemini in New York. She has clients’ use of Asset Control’s suite of which owned a stake in Hanweck. held similar roles at Tata Consultancy Gayatri services, and expanding its interna- Louis takes over the seat from Salil Services and Genpact Headstrong. Raman tional client base. Donde, former executive vice presi- Raman was appointed AIM’s The vendor says the appointment dent of global information services managing director and COO in refl ects a “continuous business growth at Nasdaq, who joined the board June 2015 and led the company and increasing market demand for risk following Nasdaq’s acquisition of ISE, alongside chief commercial offi cer and data management solutions.” but who left the exchange last year. Josef Sommeregger. Sommeregger Prior to joining Asset Control, will continue in his role as CCO and Appleby spent eight years as head of USAM Hires FX Sales Vet remains a member of the board. The sales and account management for Hastings CEO position has been vacant since Europe at pre-trade risk and post- New York-based fi ntech and data founder Martin Buchberger switched trade processing solutions provider sales agency USAM Group has hired from CEO to vice chairman in Traiana, owned by NEX. He has foreign-exchange trading technology January 2016. also held sales roles at Thomson sales veteran David Hastings in London Reuters, Bridge Information as senior management consultant. Systems, and Dow Jones Telerate. Hastings was most recently Based in London, Appleby reports a business consultant at foreign directly to Asset Control CEO exchange (FX) trading software Mark Hepsworth. vendor Tradermade, prior to which he served as interim CEO at online Nasdaq Strategy Exec Louis trading platform Prime Mantle and Joins Hanweck Board at institutional and retail FX trading Jean-Jacques Louis, senior vice presi- fi rm BT Prime. Before that, he was dent of corporate strategy at Nasdaq, global head of FX sales at Flextrade, has joined risk analytics provider global head of strategic relationships at Hanweck’s board of directors. At State Street Global Markets, and head Nasdaq, Louis oversees the strategic of relationship management at Lava and fi nancial analysis and execution Trading. In his new role, Hastings of all corporate and business unit reports to Ashley Daffi n, head of investments. EMEA at USAM Group. Offi cials say Hanweck will benefi t from Louis’ “deep knowledge and Nybo to Lead Burton-Taylor expertise in corporate structure and Exchange Research fi nance,” as it continues its growth Consultancy and research fi rm trajectory. Burton-Taylor International Before joining Nasdaq in 2004, Consulting, recently acquired by Louis was a mergers and acquisitions interdealer broker TP Icap, has banker in UBS Investment Bank’s hired Andy Nybo as director of its fi nancial institutions group, prior to exchange vertical research practice.

Gary Appleby 42 Human Capital

Pentagon Snaps Up Vincent-Silk

Pentagon Consulting, a London-based buy-side consultancy, has announced that Clare Vincent-Silk has joined its ranks as head of advisory. Her appoint- ment follows on the heels of the recent appointment of Jonathan Clark as the fi rm’s CEO. Clark joined Pentagon mid- Clare Vincent-Silk way through 2016 from Citisoft where he served as the fi rm’s CEO for a number Vincent-Silk has over 30 years’ of years. Both Clark and Vincent-Silk experience in the capital markets, most have been part of the annual Buy-Side recently as managing director of Investit, Technology Awards’ judging panel for the a buy-side consultancy also based in past decade. London. Andy Nybo

Nybo will be responsible for AIM Boosts US Sales Team tion of exchange-traded futures and building Burton-Taylor’s analysis with Ex-SmartStream’s options and over-the-counter (OTC) of current and historical exchange Woodford derivatives. market share, demand segmenta- Enterprise data management technol- Smith was previously executive tion and demographics globally ogy vendor AIM Software has hired director of strategic account manage- and regionally. Prior to joining James Woodford as sales manager in ment at CME Group, where he Burton-Taylor, Nybo spent 10 New York, responsible for accelerating spent seven years in various roles, years at industry consultancy Tabb AIM’s growth and developing new prior to which he was a director Group, where he was a managing business opportunities in the US and at clearinghouse the International director, prior to which he was head Canada, where the vendor recently Derivatives Clearing Group, and spent of marketing and communications signed its fi rst Canadian customer. fi ve years as global head of sales at the at MarketAxess, a senior analyst Before joining AIM, Woodford US Futures Exchange, following a at Tower Group, and director of spent two years as sales manager at previous three-year stint at CME in research at The Bond Market SmartStream’s Reference Data Utility, strategic account management and Association. Based in Charleston, prior to which he held senior sales FCM and exchange relations. South Carolina, Nybo will report and business development positions In his new role, he reports directly to the fi rm’s founder and at NYSE Euronext, Portware, to Ron Bundy, CEO of North managing partner Douglas B. Taylor. Lava Trading, and Bloomberg, America benchmarks at FTSE “Exchanges continue to heavily where he spent 12 years. Woodford Russell. invest in their market data businesses reports to AIM managing director and are increasingly competing and chief commercial offi cer Josef Watkins to Lead BNY Mellon directly with incumbent market Sommeregger. Markets Team in EMEA data providers,” says Nybo. Offi cials Dan Watkins has been appointed head say that Nybo’s appointment is the FTSE Russell Hires Derivatives of BNY Mellon Markets in EMEA, fi rst of “multiple new hires,” which Sales Expert Smith responsible for overseeing the growth Burton-Taylor will be making in London Stock Exchange Group- of the business unit as it responds to the near- to mid-term. TP Icap owned index provider FTSE Russell what the fi rm describes as increased acquired the assets of the fi rm in has hired Sean Smith in Chicago client demand in the face of ongoing January as part of the interdealer as managing director of derivatives regulatory and market structure broker’s strategy to expanded and licenses, to lead the expansion of the changes. He succeeds Richard Gill, grow its research arm within its data fi rm’s futures and options business, who announced his retirement earlier and analytics division. which licenses its indexes for the crea- this year.

waterstechnology.com February 2017 43 Human Capital

in the Americas. He reports to Paris- companies, as its CFO, responsible for based global head of market data and the vendor’s fi nances, administration middleware Sebastian Jouvin. and fi nancial strategy. Bowler joins Before joining York Capital SmartStream from enterprise data Management in 2012, Green spent management platform vendor Asset three-and-a-half years as vice president Control, where he also served as CFO, and market data business analyst at prior to which he was a consultant at Citi, prior to which he was data control Ullink, and spent almost fi ve years as and reporting manager at Interactive CFO for Europe and Asia at NYSE Data, a vice president and market data Technologies, which he joined as a business analyst at Bear Stearns, and a result of NYSE’s acquisition of FIX Kevin Green fi nancial analyst at Telerate. engine vendor Nyfi x, where he was fi nance director. Before that, he was Dan Watkins Wall Street Blockchain Alliance fi nance director at BT, where he Adds Santander Executive to spent seven years. Based in London, Watkins has signifi cant industry Board Bowler reports to SmartStream CEO experience, ranging from senior roles The Wall Street Blockchain Alliance Haytham Kaddoura. at JPMorgan and Jardine Fleming to (WSBA), a non-profi t trade asso- co-founding buy-side fi ntech fi rm ciation focusing on the adoption of BT’s Hafeez Named FISD Exec LatentZero, along with Richard blockchain in the fi nancial services Committee Chair Jones. He is based in London and industry, has appointed Julio Faura Data industry association FISD will report to Michelle Neal, with of Santander to its board of directors. has appointed Yousaf Hafeez, head regional accountability to Michael Faura is the head of research and of business development for the Cole-Fontayn, BNY Mellon’s EMEA development for innovative initiatives Radianz network at BT, as chair of chairman. at the Spanish bank. its executive committee. Hafeez, “Dan will play a central role in “We are witnessing a rapid evolu- who joined the committee as a further optimizing the Markets solu- tion of blockchain technology toward member in 2011, will use his “deep tion set to meet the evolving needs of enterprise-grade readiness, unraveling industry knowledge and experi- clients,” says Michelle Neal, president the enormous possibilities of shared ence” to understand and address of BNY Mellon Markets. “His diverse ledgers and smart contracts. I think the concerns of other members, experience and deep understanding it is now time to work collectively to and to contribute ideas, guide the of the pressures and opportunities better understand how this technology conversation at quarterly executive facing all market participants will be can eff ectively be used in a compliant committee meetings, and to speak particularly valuable as we intensify and secure way,” Faura said. “The goal on behalf of FISD membership. W our client focus.” is to advance the use of blockchain technology in order to off er custom- SocGen Grabs York Capital’s ers services that are more effi cient, Green faster and safer for numerous fi nancial Societe Generale has hired Kevin transactions.” Green in New York as head of market data services for the Americas. Green, SmartStream Nabs Bowler from who joins SocGen from York Capital Asset Control Management, where he was head of Reference data and post-trade market data, will be responsible for automation technology provider overseeing the bank’s administrative/ SmartStream Technologies has contract management and technical hired Richard Bowler, a veteran of Yousaf Hafeez teams within the market data function fi nance roles at data and technology

44 February 2017 waterstechnology.com FREE attendance for qualifi ed end-users

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