ANALYSIS Growing opportunity costs of running outdated technology P15 DATA Summary of fee changes at exchanges P16 COMMENT Data lakes vs data streams P18 fundintelligence.global/fundtechnology Issue 4 September 2016 P13 SECURINGHOW TO USE ARTIFICIAL ALPHA ANDINTELLIGENCE ALPHA ADVISING IN TRADING AND THE DIFFERENCE BETWEEN ROBO ADVISING It’s an evolution, not a revolution Great innovation is often built on simple ideas. We assess your company’s changing needs and look for ways to optimize your products and propose new strategies to help you reach your goals. From doing the basics better, to the most complex requirements, we offer the comprehensive fund support that can help you create your next success. Global fund administration made simple Alternative investment Exchange-traded funds administration Fund accounting Compliance and administration Mutual fund administration Custody and lending Transfer agent and Distribution and marketing shareholder services For more information about our comprehensive suite of services for alternative funds, exchange-traded funds and mutual funds, call 800.300.3863 or visit usbfs.com. Editor’s Letter SEPTEMBER 2016 3 New & outdated technologies London New York Thavies Inn House 200 Park Avenue South 3-4 Holborn Circus Suite 1603 London New York n the last decade, financial services has seen the near complete automation of EC1N 2HA NY 10003 the back office, the electronic management of order flow in OMS systems, the +44 (0)20 7832 6500 +1 (646) 891 2110 electronic management of trading in EMS systems, and even compliance and I Editorial regulation software. In this month’s edition, David Aferiat of Trade Ideas discusses Editor the next wave in this progression – the use of machine applications to the front Anna Lyudvig + 1 646 891 2130 office (p.13). [email protected] Our analysis piece looks at the growing opportunity costs of running Production outdated technology. Mike Maltby, head of Market Strategy, Eagle Investment Head of production Systems, argues that legacy systems will become too much to bear for an asset Claudia Honerjager management industry in transition (p.15). Production editor In addition, Bryan Dori and Katarina Hauben of Archer look at how to improve Charlotte Romeyer firm performance through technology. They say that it is more critical than [email protected] ever that investment managers shed their misperceptions and honestly assess Sub-editors opportunities for operational improvement (p.14). Luke Tuchscherer Alice Burton Finally, Guy Warren of ITRS Group discusses data lakes and data streams. He says that the availability of these new ways of storing and managing data has Designers Jack Dougherty created a need for smarter, faster data storage and analytics tools to keep up with Nadja Tschopp the scale and speed of the data (p.18). Commercial Associate publisher Please don’t hesitate to get in touch with any questions or suggestions on: Lucy Churchill [email protected] +44 (0) 20 7832 6615 [email protected] Membership sales +44 (0) 207 832 6500 [email protected] Events Head of events Anna Lyudvig / Editor / Fund Technology Beth Hall [email protected] +44 (0) 20 7832 6576 [email protected] Distribution Circulation manager Fay Oborne This Issue +44 (0) 20 7832 6524 [email protected] Director Gwyn Roberts +1 (646) 891 2115 [email protected] Chief executive Charlie Kerr Securing alpha Legacy Systems Data lakes vs data How to secure alpha Unearthing the opportunity streams ISSN 2398-4368 using artificial costs of running outdated Which is better for buy- intelligence? technology side businesses? Published by Pageant Media Printed by The Manson Group. Page 13 Page 15 Page 18 © 2016 all rights reserved. No part of this publication may be reproduced without written permission of the publishers. News SEPTEMBER 2016 4 Fund Updates now available like custom feed, custom data and Ativo sees major benefi ts packages,” he said. from new IT systems FinTech Ativo Capital Management, a SEC registered Xenomorph gets HSBC investment advisor with more than $1.5bn of Adan Galvan, assets under management, has heavily invested Senior portfolio funding into their back and front offi ce systems, in order manager and to sustain growth and go forward with a legacy head trader, Xenomorph, a provider of data management tech- transformation. Ativo nology to banks, investment managers and insurance Ativo is already seeing major benefi ts from the companies, has announced a signifi cant new funding new systems, according to Adan Galvan, senior agreement from HSBC. portfolio manager and head trader at Ativo. “We James Patterson, HSBC’s Area Director for Business want to make sure we have modern technology Banking in the City of London, said: “It was critical that allows us to take advantage,” he said. that Xenomorph had access to reliable fi nancing. Our At the end of last year, the fund manager brought team was able to provide this support with a fl exible on four new vendors to handle the transition into package and it is hugely rewarding to see the busi- a more robust infrastructure: Advent for the back ness already winning new clients.” offi ce; Eze Castle for the front offi ce; Axioma and “The funding comes from our commitment to lend FactSet for risk management and factoring. £2.5bn to SMEs this year and Xenomorph is a bril- For instance, Galvan said that one of the big goals liant example of how this can be used to support the in switching to Advent and to Eze was to reduce booming London fi ntech sector,” he said. some of the complexities with regard to a number of The funding has enabled the business to accelerate vendors as well as to streamline the entire process global go-to-market plans for its TimeScape EDM+ of reconciliation and trading. fi nancial analytics and data management platform. “We’ve outsourced some of the data management TimeScape EDM+ is designed to manage the com- that used to be in-house. The benefi ts are immense. plete lifecycle of fi nancial data across integration, The outsourcing part of it allows us to save a fair derivation, storage, validation, cleansing, audit, anal- amount of man power and hours of gathering data ysis and distribution. from multiple sources. It allows us to focus our energies at the problem areas rather than the data gathering process,” he told Fund Technology. That investment is now From an operational perspective, Patrick Cunningham, Operations Manager at Ativo, said: reaping signifi cant “As we’re able to gain new clients and increase the assets under management, we are able to utilize dividends and benefi ts for and leverage technology and automation in a more effi cient manner that we could with personnel.” our clients and for us” Ram Gandikota, senior portfolio manager and Brian Sentance, Xenomorph research director, added that technology is a very big component for Ativo to function smoothly. “Being systematic and being quantitative, we depend very heavily upon data. Along with that, we With HSBC’s support, the company is now in a posi- need to have right systems to scale our operations tion to market the new software across the globe and on the trading side, on the accounting side, on has already achieved successful contract wins. the management side, as well as the portfolio Brian Sentance, CEO at Xenomorph, said it has management side. In addition, on the research side, taken a signifi cant amount of time and business and we have to be able to process all this information on technical expertise to successfully launch TimeScape a daily basis,” he said. EDM+. According to Gandikota, a lot of the tools that “That investment is now reaping signifi cant div- Ativo had in-house were built using legacy systems idends and benefi ts for our clients and for us. Data like C++ and old database technology: “We are management remains a crucial function for all capital constantly innovating and constantly investing markets fi rms – especially in light of the regulations heavily on the IT side.” our clients and the market need to address,” he said. Gandikota added that the fi rm is trying to stay “TimeScape EDM+ supports trading, investment ahead of the technology curve and is trying to and risk management operations through its fl exi- improve everything from the back offi ce to the front ble and high-performance architecture, it also com- offi ce and to constantly leverage new software. prehensively addresses regulatory-driven initiatives “The next big investment for us is to pick up such as the Basel Committee’s Fundamental Review more data. There is so much more data that is of the Trading Book (FRTB) and BCBS 239. HSBC’s News SEPTEMBER 2016 5 support proves to be a great help and accelerator as it has allowed us to continue to invest in the success of the company,” he added. Trading ISDA and IHS Markit launch ISDA Amend 2.0 The International Swaps and Derivatives Association (ISDA) and IHS Markit have announced the launch of ISDA Amend 2.0, a free service for buy-side firms that allows users of Counterparty Manager to amend multiple ISDA Master Agreements and share regula- tory representations. ISDA Amend 2.0 includes new functionality to al- low market participants to implement the new mar- gining requirements for non-cleared derivatives, as well as the ability to inform counterparties about elections they have made under the ISDA Resolution Above tion to determine if, and when, their trading rela- Stay Jurisdictional Modular Protocol (ISDA JMP). ISDA Amend tionship will become subject to regulatory margin “The sheer volume of documents, coupled with 2.0 has been requirements for non-cleared derivatives in Canada, the disparate deadlines for posting initial and varia- designed to the European Union, Japan, Switzerland and the US.