By Andrew Morgan, President & Chief Revenue Officer, TS Imagine
Trading businesses are complex, and expensive to run. As well as top talent, firms require access to sophisticated infrastructure, quality data and cutting-edge tools.
Before entering fintech, I led trading businesses during periods of aggressive innovation, cost cutting and regulatory change. There were many plates to spin: nurturing client relationships, managing financial and operational risk, developing new products, keeping up with regulatory change and driving profitable growth.
Over that time a tech-led structural growth wave made the right application of software a greater source of competitive edge for the business. What was once quaint, became core. The operational flexibility that traders require to remain competitive became completely technology dependent. Your boundary conditions are the capability of your underlying systems, the size of your budget and competition for internal resources. Every plate is smashed if you cannot execute, pardon the pun.
Outdated technology can mean that entire budgets are consumed keeping lights on. While the pace of innovation and the complexity of markets continues to accelerate, legacy infrastructure falls further behind, budgets are squeezed, and internal resources are more stretched than ever. The total cost of ownership; infrastructure overhead, headcount costs, change management and opportunity cost, kills operational flexibility, and ultimately it can kill your business.
A three-part solution to a multi-faceted problem
There are three ingredients required to get the recipe right. First, a broad and robust infrastructure and connectivity network to navigate the financial ecosystem. Second, a complete, and consistent market data architecture. Essential for a modern operation and a huge overhead if managed badly. Third, and most importantly, a contemporary approach to software engineering.
When I compare the experiences of our clients with my own experiences over the past three decades, four observations emerge:
- Buy it, don’t build it.
Every self-respecting technologist is a builder and fixer at heart. I get it, in my 20’s I preferred to service my own cars. But now the best products are decades ahead and far too sophisticated to match. Most homegrown systems are expensive, inflexible, and fall well short of their architect’s vision. They contribute to technical debt and are usually out of date before they hit the desk. By any calculation, it is far less expensive to license a battle-tested electronic trading system that can be continually updated through SaaS technology, than to try to build one yourself.
- If you stay on the front foot, regulation won’t hijack your business objectives.
We witness first-hand the unpredictability of the current trading environment – not just in terms of volatility and innovation, but also the regular intervention of regulators. Involuntary changes to operations driven by new rules hijack your book of work and represent a huge drain on resource – diverting time and capital from growing your business to simply complying. The regulatory burden is easily solved by outsourcing your trading technology to a vendor who will be addressing the same issue for hundreds of clients, while you focus on running and advancing, the desk.
- You can aggregate your systems and processes under one solution.
Front office technology has reached a point where it can support the highest levels of functionality both horizontally and vertically across businesses. Horizontally, you shouldn’t need a different trading system, operating off a different code base, with different data architecture supporting different regions, asset classes, strategies, or desks. Vertically, portfolio management, financial risk management, order management, compliance libraries, general ledger, investor accounting, reporting and execution need not be fragmented. Having breadth of functional coverage to get everything from one place allows for leaner infrastructure, lower operational risk, and far more efficiency.
- In 2023, it’s time to get SaaS-y!
On premise trading technology is high maintenance and requires experienced personnel and significant investment. There is a fear that attempting to upgrade your on prem technology creates operational risk and expense. In 2023, it doesn’t have to be this hard. When you outsource your technology, you are not just buying technology, you also benefit from a global team of developers who are 100% committed to enhancing your systems as markets, regulation, and traders’ needs evolve.
It all comes down to one thing: a single solution.
For senior decision makers, mapping costs and finding efficiencies can seem a daunting task when the pressure of the day job hangs heavy. However, the solutions available now are much simpler than many realise. Trading desks can leverage technology to rationalise and futureproof systems while adapting to evolving market and regulatory conditions. How to cut total cost of ownership can be a complex question but has a surprisingly easy answer – powerful, streamlined SaaS trading technology. Turns out a trader’s greatest challenge is also their greatest opportunity.
