After two years of decline, U.S. equity trading commissions rebounded in 2024, reaching $6.2 billion.
This follows a drop from $7.4 billion in 2021 to $5.4 billion in 2023. The increase is attributed to strong equity market performance, according to annual research from Crisil Coalition Greenwich with hundreds of U.S. institutional equity investors.
“The buy side is cautiously optimistic about the future,” says Jesse Forster, Senior Analyst at Crisil Coalition Greenwich Market Structure & Technology and author of U.S. equity market trends hold steady in 2024. “The recent SEC reforms and the new SEC Chair’s focus on cooperation between regulators and market participants have created a sense of renewed possibility.”
Migration Toward Electronic Trading and Automation
The U.S. equity market continued its migration toward electronic trading last year, with 44% of overall trading volume executed electronically (including algorithmic strategies and crossing networks). Managers expect electronic trading to increase to nearly half of their flow within three years, at the expense of high-touch trading, which they anticipate will account for only 39% of their flow by then.
Across the market, traders are looking for a delicate balance between technology and human touch, with high-touch sales traders still playing a crucial role in finding hard-to-find liquidity and working complex orders.
“Buy-side traders remain resolute in their dual mandate of finding liquidity for their clients while exploring opportunities for automation within their firms,” says Jesse Forster.
What’s Driving Buy-Side Commission Allocation Among Brokers?
Buy-side traders prioritize sourcing natural liquidity when selecting a broker, with 29% of the buy side and 34% of hedge funds citing it as their top consideration. For electronic trading providers, ease of use, reliability and technical support are key, with over two-thirds of buy-side traders naming these as their primary criteria.
“The buy side has long said they wish to reward brokers who consistently add real value to their day,” says Jesse Forster. “Now that the commission pool is growing again, they may finally have the means to do so.”
Chris Isaacson is Chief Operating Officer at Cboe Global Markets.
Chris Isaacson
What were the key theme(s) for your business in 2024?
In 2024, Cboe was well-positioned to capture several long-term secular growth trends that we believe will continue well into 2025. Chief among these was the sustained growth in U.S. options trading, with the industry achieving record volumes for the fifth consecutive year in 2024. Simultaneously, we saw an increasing appetite for exposure to the U.S. markets from investors globally. In response to this demand, Cboe continued to grow its footprint across the U.S., Europe and APAC to better meet our customers where they are. We also continued to innovate and expanded our proprietary S&P 500 Index (SPX) and Cboe Volatility Index (VIX) product suites with new product launches, further enhancing the functionality and accessibility of our offerings for a wider range of customers.
As Cboe executed its business strategy throughout 2024, our leading-edge technology remained key to our success. Cboe’s technology powers every facet of our business, as evidenced by the incredible work delivered by our team this year – whether enhancing our market infrastructure to support the seamless rollout of multiple new products, features, and services, optimizing connectivity to facilitate greater access to our markets for investors outside the U.S., or strengthening the resiliency of our platforms to provide stable and efficient trading environments throughout all types of market conditions. Technology is key to how we meet customer demand and deliver on our business objectives.
What was the highlight of 2024?
One of the year’s achievements was our ability to navigate a volatile market environment while delivering record-breaking performance. Amid heightened volatility driven by ongoing geopolitical tensions, elections around the globe, and macroeconomic uncertainty, all Cboe’s markets continued to operate smoothly, maintaining greater than 99.9% uptime (with 25 of 27 markets at 100% uptime) while handling elevated trading volumes and record levels of message traffic. The resiliency of our markets, especially during the most volatile periods, is testament to the work and planning Cboe puts into business continuity.
At the same time, we executed a comprehensive slate of initiatives to further enhance the performance, resiliency, scalability and telemetry of our exchanges. In equities, we began deploying Dedicated Cores, beginning with our U.S. markets. Dedicated Cores was a standout success and exceeded even our own high expectations in improving performance for customers. In derivatives, we introduced a new architecture to access our options markets and deployed it one of our four options exchanges. This has given our customers a more consistent experience when quoting and accessing liquidity. On any given day, Cboe processes 100 billion quotes and orders across its four options markets, and this new enhancement has made messaging much more efficient. It’s also worth noting we improved the insights our customers have into their trading on our markets with the introduction of a new timestamping service which has been rolled out in our U.S. equity markets and is coming to our other global markets soon.
Expectations for 2025?
A key milestone in early 2025 will be our final technology migration in Canada, with Cboe Canada transitioning to Cboe’s proprietary technology platform. This migration marks the culmination of a multi-year effort to unify our markets under a single, globally consistent, yet locally optimized technology stack. Cboe is well-known for its capacity to release new software updates every week across our global exchanges – a capability we view as a major competitive differentiator. This capability, combined with having all of our equity, options, and futures exchanges now on a common tech platform, significantly benefits Cboe and our customers. We can develop and deploy changes with greater speed and flexibility, while maximizing opportunities for our clients to utilize new capabilities.
Beyond this, we will continue to harness our technology to expand the reach of our products, data and services into new markets, while delivering a state-of-the-art trading environment for our customers. This includes powering the newly rebranded Cboe Data Vantage business to new heights by delivering our data, access, analytics, and insights closer to customers. We’re also excited to introduce a new brand identity for our exchange technology platform: Cboe Titanium, or Cboe Ti for short. Much like its namesake, Cboe Ti represents lightweight strength, durability and exceptional resilience, offering a robust and future-proof foundation for our markets.
Trends underway that will be important?
We expect several emerging trends will continue to reshape the industry. The evolution of technology, increasingly globalized markets, 24-hour trading, and shifting investor behaviors will demand continuous innovation from exchanges. We see significant new opportunities with the democratization of data, continued smart adoption of cloud services, clearing, and data and analytics. Artificial intelligence will also play an increasingly transformative role in our business and operations. After numerous successful AI use cases were rolled out in 2024, we plan to launch even more new initiatives in 2025, empowered by our AI Center of Excellence, which fosters Cboe’s adoption of emerging technologies like generative AI. Cboe is extremely well-positioned to capitalize on many trends and we will continue to strengthen our global technology, team and capabilities to meet the evolving needs of our customers around the world.
15 January 2025, London/New York: The US Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) reported record-breaking enforcement actions in 2024, while the value of fines issued by the Financial Conduct Authority (FCA) more than tripled year-on-year, according to SteelEye’s annual fine tracker.
To create its annual snapshot of financial services penalties for compliance failures, SteelEye analyzed enforcement actions published by the US’ SEC and CFTC; the UK’s FCA; France’s Autorité des Marchés Financiers (AMF); the Netherlands’ Authority for the Financial Markets (AFM); Germany’s Federal Financial Supervisory Authority (BaFin) and Federal Office of Justice (FOJ); Singapore’s Monetary Authority of Singapore (MAS); and the Australian Securities and Investments Commission (ASIC).
The SEC and CFTC reported a record $25.3bn in combined enforcement actions in 2024, including both fines and monetary relief.
The FCA imposed £176m worth of fines in 2024, up 230% year-on-year from the £53.4m issued in 2023.
Germany’s regulators, BaFin and FOJ, doled out €24.6m worth of fines in 2024, up dramatically from €8.1m the previous year. This is despite the number of penalties issued falling over 12% to 35.
France’s AMF issued just €13.9m worth of financial penalties in 2024, down 89% from €127.9m in the previous year.
The value of fines issued by the Netherlands also fell dramatically in 2024, dropping to €3.3m from €17.4m in 2023.
Singapore’s MAS issued five fines worth a total S$7.7m in 2024, equal to the value doled out in 2023.
Australia’s ASIC issued 20 financial penalties in the first half of 2024, worth a total A$32.2m, with H2 statistics yet to be released.
US regulators continue off-channel comms crackdown in record-breaking year
The SEC and CFTC reported a combined total of $25.3bn worth of enforcement actions in 2024 – the highest to date. The SEC filed 583 penalties worth a total $2.1bn, the second-highest amount on record, while the CFTC imposed $2.6bn. The remaining sum relates to monetary relief obtained via disgorgement and restitution, with settlements for landmark cases such as the FTX scandal finalized last year.
The SEC remained steadfast in its mission to crackdown on off-channel communications in 2024. The watchdog brought more than $600m in civil penalties against more than 70 firms, with 26 firms fined a total $390m in August alone for widespread record-keeping failures. The initiative has seen the regulator fine 100 firms a combined total of more than $2bn since December 2021.
FCA enforcements back with a bang
After the number of fines imposed by the FCA fell for the first time in seven years in 2023, last year saw the regulator pursue its crackdown on financial misconduct with renewed fervor. The watchdog issued a total 27 enforcement actions worth a combined £176m – up a considerable 230% from just £53.4m in 2023.
The lion’s share of the penalties related to breaches of Principles for Businesses (PRIN) three, with eight enforcements worth more than £100m in total citing this regulation. ‘PRIN 3’ relates to management and control, stating a firm must take reasonable care to organize and control its affairs responsibly and effectively, with adequate risk management systems.
While there was significant media coverage around the FCA investigating off-channel communications in 2024, the watchdog has yet to issue any fines related to the topic.
European regulators scale back fine issuance
Three of the most prominent European regulators scaled back fine issuance in 2024.
Germany’s markets authorities, BaFin and FOJ, imposed 35 penalties worth a combined €24.6m. While this figure represents a considerable uptick from the prior year’s total of €8.1m, the regulators actually issued over 12% fewer fines. The most notable was BaFin’s nearly €13m fine for Citigroup over control failures in its algorithmic-trading business, which triggered a flash crash in European equities in 2022.
In France, the AMF issued just 10 penalties worth a total €13.9m – an 89% decline from the previous year’s combined value of €127.9m. Despite the drop off, half of the fines related to either market manipulation or insider trading, with three citing the former and two the latter.
The value of fines issued by the Netherlands’ AFM also fell considerably in 2024, dropping to €3.3m from €17.4m in 2023. The regulator issued just four fines in 2024, down from six the year prior.
APAC combats money laundering, insider trading and market manipulation
Singapore’s MAS remained focused on identifying and curbing financial crime in 2024, with the regulator issuing five penalties worth a combined S$7.7m in 2024. The most significant fine was imposed on JPMorgan over misconduct by its relationship managers, while the other four fines related to anti-money laundering breaches and insider trading.
Meanwhile, Australia’s ASIC had a busy start to 2024, issuing 20 financial penalties worth a total A$32.2m in the first six months of the year. Five penalties related to market manipulation, while two cited insider trading.
Commenting on the findings, Matt Smith, CEO and co-founder of SteelEye, said: “In many ways, 2024 was quite exceptional from a regulatory standpoint. Not only did US watchdogs report record-breaking enforcement actions, but their British counterpart shifted up a gear with regards doling out penalties – perhaps a sign of what’s to come in 2025 if the FCA’s instant messaging investigation intensifies.
“There were also interesting surprises, with European regulators appearing to take their foot off the gas somewhat with regards fine issuance. But rather than suggest a change of regulatory focus, this may be evidence that European firms have implemented more sophisticated compliance systems over recent years.
“Looking ahead, the question many firms will be pondering – particularly those with global operations – is whether Trump’s election victory will see US regulators take a more relaxed approach to enforcing issues like off-channel communications. While the intensity of enforcement action may subside in the US in 2025, we don’t expect firms will reverse any of the initiatives already put in motion. In fact, we are more likely to see increased investment on a global basis in monitoring tools to address growing risks from overlooked platforms.”
Data coverage, timeliness, and quality issues with historical data was cited as the top challenge in the investment research industry, with nearly two-fifths (37%) of respondents selecting this option, according to a research from Bloomberg.
This was followed by normalizing and wrangling data from multiple data providers (26%), and identifying which datasets to evaluate and research (15%).
Source: Bloomberg’s Investment Research Data Trends Survey
Angana Jacob, Global Head of Research Data, Bloomberg Enterprise Data, said these findings are reflective of what they’re seeing in the industry and through many conversations with their investment research and quant clients.
“A main theme that comes through is the challenge clients have with wrangling with and normalizing traditional research and alternative datasets given their sheer size and fast-changing nature,” she told Traders Magazine.
Additionally, she said in order to derive insights or backtest trading strategies, clients have to map and integrate the datasets into existing models and systems.
Angana Jacob
“Harnessing the value and potential alpha of a dataset can only happen after these foundational blocks are painstakingly stitched together, and this requires a big lift from quants, developers, data scientists and data engineers,” she commented.
Bloomberg’s Investment Research Data Trends Survey found that 72% of respondents could evaluate only three or fewer datasets at a time, despite the need from quants and research teams to continually harness more alpha-generating data in today’s data deluge.
The findings also show that the typical time it takes to evaluate a single dataset is one month or longer for more than half of respondents (65%).
According to Jacob, the desire to constantly test and incorporate new datasets is strong but, in line with the findings, typically clients can only evaluate a relatively low number at one time (three or fewer at a time for most respondents of this survey).
Additionally, more than half of respondents typically take one month or longer to evaluate a single dataset, she added.
“To gain a competitive edge in different markets, investors continuously need granular, timely, interconnected data with deep history, and it’s unsurprising that this remains the biggest research data challenge to our survey respondents,” she stressed.
More than six in ten (62%) of respondents prefer their research data to be made available in the cloud.
According to Jacob, the investing landscape has had rapid technology changes and the possibilities for quant investing and alpha generation today are completely different to what existed 5 years ago.
As an example, she said: a few years back, intraday systematic strategies required significant hardware investment and time to backtest and deploy, whereas now with scalable cloud infrastructure, strategies can be faster while markedly more powerful, incorporating more data.
“In today’s environment, customers need seamless access to market information and the ability to handle increasingly vast volumes of data for computationally-intensive investment processes such as backtesting, signal generation, optimizing portfolios, scenario analysis, hypothesis testing and so on,” she said.
“Quantitative analysis and systematic strategies are generally on the cutting edge of technology and we are seeing that with their cloud adoption,” she said.
“Cloud is a critical enabler for providing the scale, elasticity and cost efficiency to run increasingly complex investment research and trading processes,” she added.
Additionally, Jacob said that clients’ integration of Machine Learning and AI into their investment process is well-supported by cloud capabilities, enabling rapid prototyping of new trading strategies and faster simulations with unprecedented volumes of financial and non-financial data.
“Cloud platforms provide the necessary infrastructure spanning cost-effective storage, specialized hardware and elastic computational resources for intensive calculations,” she said.
According to the findings, 50% of respondents reported they currently manage the data centrally with proprietary solutions versus outsourcing to third party providers (8%), with more than six in ten (62%) of respondents preferring their research data to be made available in the cloud. Notably, 35% of respondents also would like their data to be made available via more traditional access methods such as REST API, On premise and SFTP, indicating they prefer flexibility in the choice of data delivery channels.
Jacob commented that typically, quantitative and systematic clients prefer more control and customizability over their investment research and execution process, and therefore would prefer to not outsource their entire tech stack -hence what we see in the survey results.
“However in recent years, we do see greater interest and comfort from these clients in outsourcing vertical slices of their research-to-production lifecycle to specialized providers,” she said.
“Managing the entire tech stack in-house can often detract from the primary goal of generating alpha and outsourcing could bring benefits of reduced operational burden, lower total costs and domain-specific expertise,” she added.
AI must be better integrated into investment process, new buy-side survey shows
Key findings in the 2025 InvestOps report:
A new report surveying 200 global buy-side operations leaders reveals that the majority (75%) understand the potential benefits of integrating AI, but need more information to integrate it into their investment processes.
The respondents qualitatively highlighted a need for AI to support with investment analysis, decision making, risk management, data management and client engagement.
The buy-side organizations plan to build more standardized data modeling (67%) and to consolidate systems for a common data layer (65%) to overcome challenges with their data infrastructure.
ESG investing continues to be the business area respondents see the greatest opportunity for technological innovation (58%), particularly in North America (81%).
New York, London, Copenhagen, January14, 2025 – Buy-side organizations worldwide require more information on how to integrate AI into the investment processes, reveals the InvestOps Report, “Investment Management 2025”, commissioned by financial technology company SimCorp.
Based on a survey of 200 buy-side executives conducted by WBR Insights in Q4 of 2024, the report provides insights into the buy side’s challenges and priorities entering into 2025.
The survey shows that 75 percent of respondents understand the potential benefits of AI but need more information on how to apply it effectively to the investment processes, such as investment analysis, decision making, risk management, data management and client engagement. When asked which areas that would benefit most from the use of an AI tool, one respondent noted “An AI tool can be used to uncover risks that might have remained unknown to us”. Additionally, 16 percent feel unprepared to leverage AI, while 9 percent feel very prepared.
“AI is not about replacing jobs but augmenting human capabilities, enhancing decision-making processes, and increasing efficiency. However, the advancements in AI can deliver true value for investment professionals when supported by a unified data layer where all investment data is in one place, moving away from data siloes,” said Georg Hetrodt, Chief Executive Officer at SimCorp.
When asked how to measure the success of an AI tool in the investment process, the buy-side leaders prioritize increased efficiency in data cleaning (46%), followed by enhanced data visualization (42%) and accelerated time to insights (41%).
Addressing data challenges
The report also found that nearly half of respondents (47%) say their current data infrastructure is a combination of in-house and third-party solutions, leading to data challenges. The top three priorities for addressing these in the near term are building more standardized data models (67%), consolidating systems for a common data layer (65%), and utilizing AI tools for better insights and data predictability (65%).
“Data is the “key” to the front office, yet many firms struggle with fragmented and inconsistent data sources,” said Laura Kayrouz, Senior Partner & Global Co-Head of Investments at Alpha FMC and one of the report’s contributors. “The first step to overcoming this challenge is a thorough data audit to identify gaps and redundancies. Once completed, firms should implement a robust data governance framework to ensure data accuracy, consistency, and compliance. This framework will form the foundation for a centralized data management solution, capable of breaking down silos and enabling unified data access across teams.”
When asked about technology and operations, improving data and operations for multi-asset investment strategies (40%)ranked as the topinitiative that the buy-side organizations are planning to implement. The main challenge for front office teams is the inability to manage multi-assets in one view (60%).
To effectively manage a multi-asset class portfolio — the primary challenge in supporting the front office – investment managers need a system architecture with a unified data layer that provides a total portfolio view in real time, with any changes made in one area of the business instantly reflected throughout the entire investment lifecycle for public and private markets. This is shown in the survey, where respondents plan to consolidate systems for a real time total portfolio view (64%) to address this challenge.
“What we see from this research is that investment managers increasingly need to invest in data strategies to support their goals and decision-making capabilities,” said Marc Schröter, Chief Product Officer at SimCorp. “Otherwise, when firms diversify their portfolios across more asset types, they risk adding complexity to their system landscape. This could lead to disparate silos of investment positions across the business, which slows the velocity of information and impacts the ability to scale. There’s a strong business case for data initiatives.”
Other key findings from the 2025 Global InvestOps report include:
Improving operational efficiency is the top strategic priority guiding technology and operations investments for 2025.
Inability to get a total firm-wide view of investments, risk and performance and launching new products in a timely manner are the key challenges for the buy-side firms’ existing current models.
ESG investing is the business area with the greatest opportunity for technological innovation in the next few years, particularly in North America and APAC.
Greater transparency in outsourced operations data tops the list for how the firms want to enhance their operating models in the next 24 months.
Focus on core business is the most desired outcome by using an external service provider for non-core business processes.
Survey Methodology
In Q4 of 2024, WBR Insights surveyed 200 Directors of Investment Operations and similar across APAC, EMEA, and North America, to find out about the challenges they are facing in 2024.
The report itself will be split in four, looking at how respondents are balancing their strategic priorities, the impact of data, the evolution of operating models and technological innovations being brought to the table. The survey was conducted by appointment over the telephone.
The results were compiled and anonymized by WBR Insights and are presented here with analysis and commentary by SimCorp and the InvestOps community.
About SimCorp
SimCorp is a provider of industry-leading integrated investment management solutions for the global buy side.
Founded in 1971, with more than 3,500 employees across five continents, SimCorp is a truly global technology leader that empowers more than half of the world’s top 100 financial companies through its integrated platform, services, and partner ecosystem.
SimCorp is a subsidiary of Deutsche Börse Group. As of 2024, SimCorp includes Axioma, the leading provider of risk and management and portfolio optimization solutions for the global buy side.
About WBR Insights
We use research-based content to drive conversations, share insights and deliver results. Connect with our audience of high-level decision-makers in Europe and Asia from industries including Retail & eCommerce, Supply Chain & Procurement, Finance, as well as many more. From whitepapers focused on your priorities, to benchmarking reports, infographics, and webinars, we can help you to inform and educate your readers and reach your marketing goals at the same time.
By Terry Flynn, Managing Director – Asset Management and Insurance, Fenergo
Asset managers are at a critical juncture. Following years of fee compression and ever-increasing competition, they face heightened regulatory scrutiny, pressure to expand into new asset classes such as private markets and investors’ clamoring for frictionless, digital engagement. Changes call for new strategies and approaches, and while the asset management sector has been exploring avenues to meet both investor and regulatory demands, a prominent blind spot lies in its traditional and outdated paper-filled, Excel-based and manual processes. However, as 2025 progresses, outdated processes will fade, and firms leaning into digital transformation will ultimately lead the industry.
The regulatory landscape is ever-changing
To set the scene, regulators have made their intent to increase oversight in the asset management sector known. The US Securities and Exchange Commission (SEC) 2025 exam priorities suggest that asset managers may be kept on their toes – from a strict look at the practices around fiduciary duties, AI, private funds, anti-money laundering (AML), and more; 2025 may be the year of intense scrutiny. Likewise, effective March 12, 2025, the expanded reporting requirements of Form PF will further challenge asset managers and compliance teams, demanding additional time and resources to meet these obligations.
Not to be outdone, the Financial Crimes Enforcement Network (FinCEN) finalized new rules for the industry,, mandating significant updates to firms’ AML/CFT programs. These updates require a risk-based and reasonably designed approach to align US standards more closely with international AML regulations. It will be very challenging, if not impossible, for firms to comply with these new rules utilizing manual processes, based on spreadsheets and static reports. Automated, digital solutions will be the rule not the exception going forward. Firms that continue to try to manage this process manually will see increases in operational costs, while leaving them vulnerable to the regulatory and reputational risk of suspicious activity falling through the manual cracks.
While each looming regulatory shift may have its nuances, there is a key underlying necessity to meet them: accurate, real-time data, feeding reporting and analytics is at the center of compliance processes. The call for digitization to ease compliance burdens, enhance operational efficiency and provide better investor experience can no longer be neglected. Automating reporting can significantly improve accuracy, streamline operations, and help firms effectively manage and keep pace with evolving regulatory requirements and expectations.
Old habits die hard, but die they must
According to a recent Accenture survey, 95% of asset managers believe “technology, data, and digital capabilities will be differentiators in 2025.” Yet, 72% admit that they “do not view themselves as leading firms when assessing their digital maturity.” This highlights a significant gap between where the industry knows it needs to be and its preparedness to reach that goal.
The sector is hindered by manual processes and fragmented, siloed data sets, leaving significant potential growth opportunities untapped. Without adopting digital-led tools and solutions, managers face challenges in establishing a reliable single source of truth for data and will find it difficult to access the real-time insights they need. Furthermore, with inconsistent data, a manager looking to onboard a new asset class or strategy will likely fall into quicksand. Every attempt to move forward will be challenging as they are met with incomplete workflows, error-prone processes, and limited visibility. These inefficiencies not only burden managers but also spark investor dissatisfaction as the client experience is subpar, marred by delays, duplicative requests and an overall lack of transparency.
Enhancing data management and implementing better tactics to the client lifecycle
Automation is a game-changer; however, firms must ensure their data is in tip-top shape before jumping into and reaping the benefits of this technology. Asset managers maintain huge, but often disparate, data sets which means that checking and aligning data into a single source of truth cannot happen overnight. It takes time, coordination, and a strategic approach to ensure that all data stored is accurate and valid and that the data lives in a central repository. Data governance measures must also be implemented to ensure proper data control, quality, privacy, and compliance. Once this is created, firms are better positioned to leverage automation and other digital-first solutions, such as generative AI.
The benefits of automation can be vast. For example, cross-selling can be a challenge without reliable, well-organized data, but having a robust data infrastructure enables seamless cross-selling opportunities. Plus, leveraging predictive analytics can provide managers with insights to deliver more personalized approaches – a requisite that investors increasingly seek.
Automation can be a strong ally for compliance teams within financial institutions, creating a proactive rather than reactive environment. Teams can use solutions that automate the transaction monitoring process and transform the AML process. Automated systems can flag real-time suspicious activities and generate alerts according to specific thresholds, allowing compliance teams to focus on other areas and ensuring no mistakes occur.
First impressions matter
Unfortunately, onboarding inefficiencies have deep roots that significantly impact organizations. In the Global KYC Trends in 2024 Asset Management report, 74% of surveyed firms have reported losing an investor due to poor onboarding experiences. This number is too large to be ignored, especially when automation can support an effective onboarding process. When diving into the data, the top grievances uncovered included repeated documentation requests (40%), complex processes (38%), and onboarding delays (36%). For investors, first impressions leave lasting thoughts, and given that the asset management sector is about building and fostering relationships, one poor investor experience can impact a firm’s ability to grow, as word of mouth can be a powerful method in shaping perceptions.
Meeting diversification needs requires more than just the basics
Diversification across asset classes is at the top of investors’ agendas. As a result, asset managers who want to succeed need to oblige or they will fall short of client expectations. However, this brings about an onslaught of new considerations. From reporting on a broader range of investment and fund structures to more detailed data gathering, and stricter oversight of investment and counterparty exposure to name a few.
The current protocols asset managers deal with are ineffective. Manuel’s inefficiencies limit managers and, in many cases, will be a bottleneck in collecting, analyzing, and providing the required data to make informed decisions.
In line with a greater demand for diversification, many investors are looking for investments to expand across borders, specifically for a global approach to achieve optimal returns and cushion against any regional market volatility. To keep up, asset management firms need to harness the power of digital transformation to seamlessly traverse the onboarding demands of new and frequently complex jurisdictions. By integrating automated Know Your Customer (KYC) solutions, firms can efficiently conduct comprehensive risk and compliance checks and robust risk assessments, allowing for reliable and accurate decisions. Utilizing predictive analysis and machine learning for diversification strategies can provide asset managers with advanced insights further mitigating potential risks.
Is AI and KYC a match made in heaven?
KYC processes can significantly benefit from AI implementation. Not only does it offer better fraud detection measures, enhanced due diligence, and streamlined onboarding, but it also provides scalability. Firms can take in large quantities of data without burdening the compliance teams. Moreover, the ability to offer better illicit finance detection allows teams to use their time for more strategic and personalized investor relations insights, cross-selling, and beyond.
It’s important to note that using AI and machine learning technology effectively requires proper implementation and high-quality data. Taking it a step further, while AI regulations have not yet been enacted, that does not mean they aren’t around the corner. With that in mind, when implementing AI, understanding the regulatory risks and ensuring you are thinking ahead of potential reporting measures is paramount.
The need for change is here and those who adapt are primed for success
The push for transformation is here, and managers that harness the power of automation will be miles ahead of the pack. By embracing automation, streamlining processes and centralizing data, firms can enhance the investor experience, reduce costs and stay ahead of regulatory demands. Not only does this have the potential to help with profitability but it leads to an enhanced and potentially personalized experience for the investors – a win-win.
New monthly ranking of equity brokers provides independent proxy of institutional market
CHICAGO, Jan. 14, 2025 – Trading Technologies International, Inc. (TT), a global capital markets technology platform services provider, announced today it has launched TT Broker Scorecard, a first-of-its-kind monthly report ranking global and regional equity brokers by liquidity and execution quality. The report provides an independent proxy of the institutional market with rankings derived from the aggregated, anonymized trade data compiled by Abel Noser Solutions, which TT acquired in 2023.
TT Broker Scorecard is available through Trade Zoom, Abel Noser Solutions’ industry-leading transaction cost analysis (TCA) solution for investment managers, asset owners, consultants and brokers worldwide. Users of Trade Zoom’s post-trade application will have the ability to retrieve historical information from the platform, with the option to drill down and examine data in greater detail.
TT Broker Scorecard enables buy-side market participants to easily identify and vet brokerage firms that trade in specific market segments, then pinpoint broker liquidity, estimate costs before trade execution, and use Abel Noser Solutions’ TCA product suite to measure post-trade transaction efficacy against a peer universe. Sell-side firms can identify both their competitive strengths as well as areas for improvement, and then market to customers in regions or segments where they are the strongest.
Peter Weiler, EVP Managing Director, Data & Analytics at TT, said: “In today’s ultra-competitive environment, the buy side is increasingly trying to find liquidity in highly concentrated markets, while the sell side is seeking ways to protect and grow market share. TT Broker Scorecard will help firms on both sides uncover distinct business advantages by leveraging the massive universe of data that flows through our market-leading TCA platform. Our buy-side clients can find the counterparties that are most active in specific regions, countries, capitalizations, sectors and other segments. Sell-side brokers can identify and promote where they offer the most liquidity while establishing where they should focus on growing, leapfrogging competition or maintaining market share.”
The launch of TT Broker Scorecard builds on several significant TCA-related milestones the firm reached in recent months. In November, Abel Noser Solutions won the Editors’ Choice Award for TCA Provider of the Year in The TRADE’s inaugural Leaders in Trading New York Awards as well as the award for Best Buy-Side TCA Tool in WatersTechnology’s Buy-Side Technology Awards 2024. In June, TT introduced TT Futures TCA, a comprehensive new offering leveraging the industry’s largest collection of anonymized, microsecond-level futures market and trade data with a vast array of metrics and measures and an unprecedented level of granularity with real-world futures trading data.
Abel Noser Solutions is a leader and pioneer in helping buy-side and sell-side firms lower costs associated with trading and utilize analytics to govern their trading decisions. More than 350 global institutional clients subscribe to the firm’s multi-asset TCA and compliance products directly or through a network of resellers, distribution partners and strategic alliances. Abel Noser co-created the volume-weighted average price (VWAP) methodology – now one of the financial markets’ most ubiquitous trade cost methodologies. Abel Noser became a Trading Technologies company in August 2023, marking TT’s extension into the multi-asset data and analytics space.
About Trading Technologies
Trading Technologies (www.tradingtechnologies.com) is a Software-as-a-Service (SaaS) technology platform services provider to the global capital markets industry. The company’s award-winning TT® platform connects to the world’s major international exchanges and liquidity venues in listed derivatives alongside a growing number of asset classes, including fixed income, foreign exchange (FX) and cryptocurrencies. The TT platform delivers advanced tools for trade execution and order management, market data solutions, analytics, trade surveillance, risk management, clearing, post-trade allocation and infrastructure services to the world’s leading sell-side institutions, buy-side firms and exchanges. The company’s blue-chip client base includes the Tier 1 banks as well as brokers, money managers, hedge funds, proprietary traders, Commodity Trading Advisors (CTAs), commercial hedgers and risk managers. These firms rely on the TT ecosystem to manage their end-to-end trading operations. In addition, exchanges utilize TT’s technology to deliver innovative solutions to their market participants. TT also strategically partners with technology companies to make their complementary offerings available to Trading Technologies’ global client base through the TT ecosystem.
TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
Happy New Year to all our regular readers!
We’re kicking off 2025 with a countdown of what we think were the 10 most interesting charts from our blogs in 2024.
As you’ll see, we covered a lot of different topics – from introductions to options and short selling to latency to making markets better for issuers and investors.
We start our countdown at number 10:
10. Our first interns’ guide to options
In 2024, we added to our suite of regular summer interns’ guides. In addition to introductions to market structure, how trading works and ETFs, we added a guide to options markets.
This included a lot of information, such as how option payoffs work, where the liquidity in U.S. options markets is, and when and how each option expires (Including a useful table showing what options expire in the open vs. the close, and which have physical delivery).
But my favorite chart from the blog looked at the “moneyness” of options being traded. As the chart shows, the majority of options being traded when they are “out of the money.” That significantly reduces the premium costs (as the likelihood of exercise is lower) and the amount of hedging a market maker would need to do (as the delta is lower). It also means that adding up “options notional value traded” provides a meaningless comparison to liquidity in underlying stocks as the exposures and hedging are both well below 1-to-1.
Chart 10: Most options are trade when they are out of the money
9. Short interest isn’t as scary as it seems
It’s fair to say that investors and companies both don’t like it when their stock prices fall. However, it’s usually wrong to focus blame on short sellers.
As we detailed in a blog in 2024, there is data available to help us understand some aspects of short selling.
First, we saw that despite a very high proportion of trades having a “short sell” flag on them, the actual levels of short interest (or holdings) in the market tend to be much lower and stable. As the chart below shows, most stocks have 5% or less of their shares outstanding held short. That confirms that most short selling is done by “bona-fide market makers” who are required to sell and buy all day (to qualify as a market maker) and not adding to directional positions.
We also cited rules that require stock to be borrowed before settlement. That’s so buyers can receive the stock they bought from a “short” seller – as without that, the trade would “fail.” And data shows that failing trades are relatively rare, and most fails are for exceptionally small (most likely retail) trades.
Chart 9: Most stocks have below 5% of their shares outstanding shorted
It’s also important to note that research consistently shows that short selling makes markets more efficient. It allows for hedging and cross-market arbitrage to occur, which helps keep Futures and ETF prices correct and stock spreads tight.
8. What defines a small-cap stock depends on the index provider
People frequently talk about large-, mid- and small-cap stocks – as if it is clear what companies are included in each group.
However, our favorite chart from that study shows that it can depend a lot on which index provider you are using. In fact, the chart below shows that some small-cap stocks are larger than the smallest large-cap stocks. Although to be fair, that’s a result of price changes during the year as well as a conscious decision to reduce index turnover and trading cost for anyone running an index fund.
Chart 8: Stocks included in different market cap indexes by index provider
7. Looking at index trades to estimate index tracking
Index funds and ETFs are getting more and more popular.
In another study, we looked at how much of a company’s available shares trade in the close on an index addition date.
The results were revealing, showing that the market can provide a huge amount of liquidity instantly as the market closes in order to satisfy indexer demand. That’s even more impressive given recent research shows the cost of that liquidity has been falling even as index funds continued to grow.
Chart 7: The MOC is able to absorb huge amounts of liquidity on index rebalance dates
6. Is the U.S. really the most liquid market in the world?
People frequently boast about how the U.S. is the cheapest, most liquid equity market to trade in the world.
However, with roughly 6,000 companies listed in the U.S. versus less than 900 companies listed in France, is it even fair to compare trading in Apple to Total?
It’s fairer if we compute the “market-cap turnover” of each company, which is measured as the times the total available shares trade each year. That accounts for different share prices and market caps around the world.
The result (as we show in the chart below) was revealing. U.S. liquidity was good, but not the greatest. Notably, liquidity in a number of Asian countries – with generally strong retail markets – was, on average, even better. Although, as another chart in that study showed, Asia’s larger developed markets dragged the average for the whole region down below that of the U.S.
Chart 6: Annual market-cap turnover for each stock (by country)
5. Exchanges fees work very differently to ATS’s
The U.S. Securities and Exchange Commission (SEC) was extremely busy in 2024, finalizing a multitude of new rules. A few targeted exchanges and their fee structures, including reducing access fees and eliminating volume discounts for lcustomers who trade and quote a lot.
These rules only affected how exchange fees work, which was ironic, given that 2024 was also the year that off-exchange trading passed the 50% mark (more than once). That’s especially important as it’s a level considered a tipping point critical to market quality and having an NBBO that is meaningful to the market and actually protects investors.
In short, by focusing on exchange fees, the SEC missed the increasingly competitive economics of the “other half” of the market.
We have said before that equal is not fair. That’s something that seems undeniably clear when you look at rates charged for the SIP (which include volume discounts) and how the SEC recoups its annual budget (which varies over time).
The economics of the “other half” of the market is very different. Rather than being fair access and equal (like the SEC wants for exchanges), it is bilateral and bundled, with customer quality tiers and segmentation that adds to spread capture (allowing fees to be higher). In fact, as the chart below from this blog highlighted, ATSs charge a wide range of fees – from “free” to much higher than the current exchange fee cap.
Either way, “ten” is clearly not the norm, nor could it be said that other fees in the marketplace are “equal”.
Chart 5: Form ATS-N shows just how complicated market pricing is across (even off-exchange) venues
4. One millisecond is only de minimis to a human
Years ago, the SEC created a new “de minimis” rule designed solely to approve IEX’s speed bump market (the same year they denied Cboe their own speed bump proposal, which was only fractionally slower). The SEC has since leaned on that rule to approve IEX’s D-limit (fade-able but protected) lit quotes. Ironically, the U.S. regulator declined to use it for determining an acceptable level of latency for the SIP.
All of that history is relevant to a study of trading latency we did in 2024.
What we discussed in that blog was how, even at the speed of light, it takes time for a trade to travel around the U.S. marketplace for fills, which happen in real-time, fractions of a second apart, causing reverberations across the market.
In fact, what our favorite chart from that blog showed, using microsecond timestamps (one-thousandth of a millisecond) is that we can see a lot of trades in the U.S. market initiate from Secaucus, where most broker algorithms are located. Initially, the orders from those algorithms travel at fiber speed around the U.S. market (pink arrows), then, as fills are seen at each venue, a reaction seems to occur at microwave speeds (green arrows) before finally passing through the IEX speed bump and trading there last, if any of their quotes have not, by then, been repriced.
Even with the IEX speed bump delaying trades occurring on their venue, from start to finish, this all happens in less than 1 millisecond.
Chart 4: Trades travel around the U.S. market and cause reactions that last less than one millisecond
3. Latency arbitrage detected in London dark pools
What we talk about in Chart 4 above is what leads people to talk about latency arbitrage. A new academic study showed how this can work in practice in dark pools in the United Kingdom.
Dark pools, by design, peg orders to the quotes set by exchanges. The chart from that blog that most clearly showed what they found is below. It shows:
The bid on exchange increasing (green color).
Before a fill occurs in a dark pool at the “old midpoint.”
This is possible because “fast” arbitrageurs can send a trade on microwave, while quotes travel on optic fiber (which has a slower speed of light but is more reliable).
The study found that “a substantial amount of stale trading occurs [in dark pools].” They also found that arbitrageurs were on the winning side of the trade more than 96% of the time – buying at the stale midpoint while selling at the primary markets at a newer, higher price.
Chart 3: Dark fills occurring at old midpoints thanks to distance-created latency
It has since been replicated across Europe, with research from Euronext, SIX Swiss and Deutsche Börse finding similar results.
This study has important implications for the consolidated tape debates occurring in Europe and elsewhere.
Said another way, a consolidated tape can never be pre-trade (it’s just physics). However, it could be used to quantify how much trading is occurring at these stale quotes.
This has market structure implications, too. The fragmentation reduces the fill probability to dark pool customers (even if a buyer crossed the lit market spread) but also makes spread capture harder on the primary market harder (as spread crossers are mostly more aggressive trades). The result is worse economics for price setters and ultimately wider spreads and less depth.
2. Depth and spreads react to basic economics of supply and demand
Tick sizes have been studied in depth by us and academics. The findings are all pretty consistent, showing that the economics of spreads and depth are driven by simple supply and demand.
In the blog where we summarized these findings, the most relevant chart is the one below. It shows that:
Supply and demand curves for stocks tend to be quite linear.
Reducing the tick (for tick-constrained stocks) helps to reduce not only the spread but also the depth. For investors, spreads and depth are a trade-off.
Based on all the studies, the only result that was able to improve both spreads and depth of the NBBO was the trade-at group in the Tick Pilot study (shown as G3 below). Interestingly, that’s what happens when the price setter gets to capture their own spread – rather than BBO being used to trade elsewhere like we see in chart 3 above.
Chart 2: Research shows improving spreads almost always worsens depth; it’s a trade-off without trade-at
1. Nasdaq has better auctions for issuers
During 2024, we saw the 500th company switch from NYSE to Nasdaq.
Obviously, we all trade in an NMS world (National Market System) with UTP (unlisted trading privileges) meaning stocks can trade anywhere – regardless of where they are listed.
But when we look at the data, we see that Nasdaq market quality is still better for companies.
Our favorite chart from that blog looked at the open and closing auctions. It shows that different auction rules can reduce a stock’s volatility. That’s important because research suggests that it can reduce a company’s cost of capital, which should lead to additional investments and returns for investors. This, in turn, is good for the U.S. economy.
Chart 1: Switches have lower auction volatility on Nasdaq
We hope everyone had a happy and healthy holiday season. We’re looking forward to bringing more new and interesting insights throughout 2025.
Creating tomorrow’s markets today. Find out more about Nasdaq’s offerings to drive your business forward here.
Pico and BMLL Forge Groundbreaking Partnership to Offer Enhanced Historical and Real-Time Data Integration Capabilities
Partnership offering clients the ability to integrate BMLL and Pico’s suite of products
NEW YORK, 14 January 2025 – Pico, a leading global provider of mission-critical technology services, software, data and analytics for the financial markets community, and BMLL, a leading independent provider of harmonized Level 3, 2 and 1 historical data and analytics, today announced a strategic partnership designed to uniquely address the growing need for access to real-time and historical data sets simultaneously to accelerate research, understand liquidity dynamics and optimize trading outcomes.
Central to the partnership, Pico’s raw real-time and historical data empowers BMLL’s Level 3, 2, and 1 offerings, enabling clients to gain granularity and actionable insights. In addition, Pico’s globally comprehensive infrastructure, market and broker connectivity, high-performance feed handler, and API for market data and order execution further enhance these capabilities. The combination of Pico and BMLL products and services provides a full-suite solution of historical data, backtesting, and live trading environments tailored for quantitative analysts, banks, and brokers to transition from research stages through to production while optimizing performance and reducing complexity – an unmatched combination in the industry.
This specialized end-to-end solution recently addressed the needs of a large European hedge fund expanding into U.S. equities. By leveraging the combined normalized raw historical and real-time data, it provided increased efficiency in market data functionality, performance, flexibility, and time to market.
“Integrating Pico’s solutions with BMLL allows quants and high-performance traders to streamline their workflows with a unified set of technologies as they move through their journey from research to testing and into production,” said Jarrod Yuster, Chairman, Founder and CEO of Pico. “This solution directly addresses the growing demand for comprehensive front-office trading technology, streamlining the entire process with precision and efficiency.”
BMLL offers high-quality historical data derived from raw underlying exchange data; this data is harmonized into a consistent, lossless global format with nanosecond timestamp granularity to provide market participants with better insights and analytics. Clients can leverage BMLL’s granular Level 3 historical data feed alongside Pico’s low-latency real-time solution to seamlessly transition between scalable Level 3 research environments and low-latency production environments.
“We have seen increasing levels of demand for an offering that combines a lower latency real-time environment with high-quality historical data in a consistent data format,” said Paul Humphrey, Chief Executive Officer of BMLL. “This partnership with Pico addresses the very real pain points of many systematic traders who have dedicated far too many resources to migrating data between systems. Now, clients can spend 100% of their time gaining valuable insights rather than on unnecessary data cleansing. We are delighted to partner with Pico to advance this solution for the capital markets.”
Pico’s robust product suite, including 50+ global hosting facilities that provide direct exchange access and cloud connectivity, Redline’s ultra-low latency feed integration, and Corvil’s advanced network monitoring, complements BMLL’s historical data, ensuring seamless transitions from research to live trading environments. Pico and BMLL set a new standard for high-performance data integration capabilities for financial institutions seeking historical insights and real-time market data.
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About Pico
Pico is a leading global provider of technology services for the financial markets community. Pico’s technology and services power mission-critical systems for global banks, exchanges, electronic trading firms, quantitative hedge funds, and financial technology service providers. Pico provides a best-in-class portfolio of innovative, transparent, low-latency markets solutions coupled with an agile and expert service delivery model. Instant access to financial markets is provided via PicoNet™, a globally comprehensive network platform instrumented natively with Corvil to generate analytics and telemetry. Clients choose Pico when they want the freedom to move fast and create an operational edge in the fast-paced world of financial markets.
BMLL Technologies is the leading, independent provider of harmonised, Level 3, 2, and 1 historical data and analytics to the world’s most sophisticated capital market participants, covering European and US equities and ETFs as well as global futures.
BMLL offers banks, brokers, asset managers, hedge funds, global exchange groups, academic institutions and regulators immediate and flexible access to the most granular Level 3, 2 and 1 T+1 order book data and advanced pre-and post-trade analytics. BMLL gives users the ability to understand market behaviour, accelerate research, optimise trading strategies and generate alpha more predictably.
Global banks are expected to cut up to 200,000 jobs over the next three to five years as Artificial Intelligence (AI) increasingly takes over tasks traditionally performed by human workers, according to a recent report by Bloomberg Intelligence (BI).
Tomasz Noetzel
The report, based on a survey of Chief Information and Technology Officers, reveals that, on average, banks are preparing to reduce 3% of their workforce.
The most vulnerable areas are likely to be back office, middle office, and operations, with customer service roles also at risk due to the rise of AI-powered bots.
Positions involving repetitive, routine tasks, such as know-your-customer (KYC) responsibilities, are also at risk, though Tomasz Noetzel, BI’s senior analyst who authored the report, emphasized that AI will not entirely eliminate these jobs.
Instead, the workforce will undergo a transformation, he said.
Nearly a quarter of the 93 respondents in the survey foresee a more significant reduction in headcount, with cuts ranging from 5% to 10%. This group includes major institutions such as Citigroup, JPMorgan Chase, and Goldman Sachs.
The findings suggest that these changes will reshape the industry and contribute to stronger financial performance. By 2027, banks could see pretax profits rise by 12% to 17%, adding up to $180 billion to their collective bottom line, driven by the productivity gains from AI, according to Bloomberg Intelligence. In fact, 80% of respondents believe generative AI will boost both productivity and revenue by at least 5% within the next three to five years.
Banks, which have spent years upgrading their IT systems to streamline processes and reduce costs in the aftermath of the financial crisis, are now embracing the latest AI technologies to further enhance productivity.
Citigroup’s June report highlighted that the banking sector is likely to experience more job displacement from AI than any other industry, with 54% of roles at risk of AI-led job displacement. Additionally, another 12% of banking jobs could potentially be augmented by AI.
Even though AI may replace certain roles within the industry, Citigroup pointed out that this doesn’t necessarily mean a reduction in overall headcount. Financial firms are expected to hire new positions, such as AI managers and AI-focused compliance officers, to oversee the technology’s implementation and ensure it complies with regulatory standards.
Over the past year, the world’s largest banks have been increasingly experimenting with AI, motivated by the promise of boosting staff productivity and cutting costs. The report suggests that AI could add $170 billion to the banking industry’s revenues by 2028.
JPMorgan CEO Jamie Dimon also discussed the broader impact of AI in a 2023 interview with Bloomberg Television. He expressed his belief that AI will significantly impact the workforce, potentially leading to shorter workweeks for future generations due to its ability to automate tasks and enhance productivity, while also acknowledging concerns about potential misuse of the technology by “bad people.”
The Call for Automation to Enhance Compliance and the Investor Experience is Here – Will Asset Managers Respond?
By Terry Flynn, Managing Director – Asset Management and Insurance, Fenergo
Asset managers are at a critical juncture. Following years of fee compression and ever-increasing competition, they face heightened regulatory scrutiny, pressure to expand into new asset classes such as private markets and investors’ clamoring for frictionless, digital engagement. Changes call for new strategies and approaches, and while the asset management sector has been exploring avenues to meet both investor and regulatory demands, a prominent blind spot lies in its traditional and outdated paper-filled, Excel-based and manual processes. However, as 2025 progresses, outdated processes will fade, and firms leaning into digital transformation will ultimately lead the industry.
The regulatory landscape is ever-changing
To set the scene, regulators have made their intent to increase oversight in the asset management sector known. The US Securities and Exchange Commission (SEC) 2025 exam priorities suggest that asset managers may be kept on their toes – from a strict look at the practices around fiduciary duties, AI, private funds, anti-money laundering (AML), and more; 2025 may be the year of intense scrutiny. Likewise, effective March 12, 2025, the expanded reporting requirements of Form PF will further challenge asset managers and compliance teams, demanding additional time and resources to meet these obligations.
Not to be outdone, the Financial Crimes Enforcement Network (FinCEN) finalized new rules for the industry,, mandating significant updates to firms’ AML/CFT programs. These updates require a risk-based and reasonably designed approach to align US standards more closely with international AML regulations. It will be very challenging, if not impossible, for firms to comply with these new rules utilizing manual processes, based on spreadsheets and static reports. Automated, digital solutions will be the rule not the exception going forward. Firms that continue to try to manage this process manually will see increases in operational costs, while leaving them vulnerable to the regulatory and reputational risk of suspicious activity falling through the manual cracks.
While each looming regulatory shift may have its nuances, there is a key underlying necessity to meet them: accurate, real-time data, feeding reporting and analytics is at the center of compliance processes. The call for digitization to ease compliance burdens, enhance operational efficiency and provide better investor experience can no longer be neglected. Automating reporting can significantly improve accuracy, streamline operations, and help firms effectively manage and keep pace with evolving regulatory requirements and expectations.
Old habits die hard, but die they must
According to a recent Accenture survey, 95% of asset managers believe “technology, data, and digital capabilities will be differentiators in 2025.” Yet, 72% admit that they “do not view themselves as leading firms when assessing their digital maturity.” This highlights a significant gap between where the industry knows it needs to be and its preparedness to reach that goal.
The sector is hindered by manual processes and fragmented, siloed data sets, leaving significant potential growth opportunities untapped. Without adopting digital-led tools and solutions, managers face challenges in establishing a reliable single source of truth for data and will find it difficult to access the real-time insights they need. Furthermore, with inconsistent data, a manager looking to onboard a new asset class or strategy will likely fall into quicksand. Every attempt to move forward will be challenging as they are met with incomplete workflows, error-prone processes, and limited visibility. These inefficiencies not only burden managers but also spark investor dissatisfaction as the client experience is subpar, marred by delays, duplicative requests and an overall lack of transparency.
Enhancing data management and implementing better tactics to the client lifecycle
Automation is a game-changer; however, firms must ensure their data is in tip-top shape before jumping into and reaping the benefits of this technology. Asset managers maintain huge, but often disparate, data sets which means that checking and aligning data into a single source of truth cannot happen overnight. It takes time, coordination, and a strategic approach to ensure that all data stored is accurate and valid and that the data lives in a central repository. Data governance measures must also be implemented to ensure proper data control, quality, privacy, and compliance. Once this is created, firms are better positioned to leverage automation and other digital-first solutions, such as generative AI.
The benefits of automation can be vast. For example, cross-selling can be a challenge without reliable, well-organized data, but having a robust data infrastructure enables seamless cross-selling opportunities. Plus, leveraging predictive analytics can provide managers with insights to deliver more personalized approaches – a requisite that investors increasingly seek.
Automation can be a strong ally for compliance teams within financial institutions, creating a proactive rather than reactive environment. Teams can use solutions that automate the transaction monitoring process and transform the AML process. Automated systems can flag real-time suspicious activities and generate alerts according to specific thresholds, allowing compliance teams to focus on other areas and ensuring no mistakes occur.
First impressions matter
Unfortunately, onboarding inefficiencies have deep roots that significantly impact organizations. In the Global KYC Trends in 2024 Asset Management report, 74% of surveyed firms have reported losing an investor due to poor onboarding experiences. This number is too large to be ignored, especially when automation can support an effective onboarding process. When diving into the data, the top grievances uncovered included repeated documentation requests (40%), complex processes (38%), and onboarding delays (36%). For investors, first impressions leave lasting thoughts, and given that the asset management sector is about building and fostering relationships, one poor investor experience can impact a firm’s ability to grow, as word of mouth can be a powerful method in shaping perceptions.
Meeting diversification needs requires more than just the basics
Diversification across asset classes is at the top of investors’ agendas. As a result, asset managers who want to succeed need to oblige or they will fall short of client expectations. However, this brings about an onslaught of new considerations. From reporting on a broader range of investment and fund structures to more detailed data gathering, and stricter oversight of investment and counterparty exposure to name a few.
The current protocols asset managers deal with are ineffective. Manuel’s inefficiencies limit managers and, in many cases, will be a bottleneck in collecting, analyzing, and providing the required data to make informed decisions.
In line with a greater demand for diversification, many investors are looking for investments to expand across borders, specifically for a global approach to achieve optimal returns and cushion against any regional market volatility. To keep up, asset management firms need to harness the power of digital transformation to seamlessly traverse the onboarding demands of new and frequently complex jurisdictions. By integrating automated Know Your Customer (KYC) solutions, firms can efficiently conduct comprehensive risk and compliance checks and robust risk assessments, allowing for reliable and accurate decisions. Utilizing predictive analysis and machine learning for diversification strategies can provide asset managers with advanced insights further mitigating potential risks.
Is AI and KYC a match made in heaven?
KYC processes can significantly benefit from AI implementation. Not only does it offer better fraud detection measures, enhanced due diligence, and streamlined onboarding, but it also provides scalability. Firms can take in large quantities of data without burdening the compliance teams. Moreover, the ability to offer better illicit finance detection allows teams to use their time for more strategic and personalized investor relations insights, cross-selling, and beyond.
It’s important to note that using AI and machine learning technology effectively requires proper implementation and high-quality data. Taking it a step further, while AI regulations have not yet been enacted, that does not mean they aren’t around the corner. With that in mind, when implementing AI, understanding the regulatory risks and ensuring you are thinking ahead of potential reporting measures is paramount.
The need for change is here and those who adapt are primed for success
The push for transformation is here, and managers that harness the power of automation will be miles ahead of the pack. By embracing automation, streamlining processes and centralizing data, firms can enhance the investor experience, reduce costs and stay ahead of regulatory demands. Not only does this have the potential to help with profitability but it leads to an enhanced and potentially personalized experience for the investors – a win-win.