TECH TUESDAY is a weekly content series covering all aspects of capital markets technology. TECH TUESDAY is produced in collaboration with Nasdaq.
Over the last three years, numerous events and macroeconomic developments such as the pandemic, the invasion of Ukraine and the rise in inflation and interest rates, have caused sudden spikes in volatility and trading volumes in capital markets globally. This has highlighted the need for financial market infrastructures (FMIs) to ensure they have sufficient flexibility and capacity to handle disruptions and increased volumes in an uncertain environment.
At the same time, market participants increasingly assume to see the digitalization that has transformed many other industries, and expectations on modern services and support for new products in both traditional and digital assets have increased. While technological innovation, such as cloud, is not new, the pace of adoption has accelerated. Gartner estimates that end-user spending on public cloud services will reach nearly $600 billion in 2023, up from $411 billion in 2021.
“We are in the beginning of the next wave of change, and this will fundamentally change the data and compute model of this industry,” Magnus Haglind, Head of Products in Marketplace Technology at Nasdaq, said in a recent Nasdaq Pulse video. “Improved agility, product creation capabilities, and client centricity are top priorities for FMIs.”
As a result, change management has become a foundational capability for FMIs – including exchanges and other trading venues, clearinghouses and central securities depositories – as they see the benefits of implementing transformative technologies such as cloud and AI. Change has traditionally been driven through large programs with clearly defined outcomes, such as the need to meet new regulations, but this now needs to become a continuous process and natural part of the organization to manage constant change in the coming decade.
“Think about it as a skillset for the whole organization that requires you to mobilize your whole management team in driving change,” said Haglind. “It requires business support, technology support, and championship from everyone in the management team.”
Nasdaq has gained experience over years of cloud transformation and found that the first step required in developing a modernization strategy is to set a long-term vision for innovation, and involve external and internal stakeholders (customers, regulators, staff, and shareholders) to gain necessary support.
Haglind recommended that FMIs take a proactive, stepwise approach to architecture and infrastructure modernization with appropriate testing and robust internal and external feedback at each milestone, enabled by modular platforms and microservices. A modern data strategy is also needed to garner actionable insights and create a strong foundation for data-driven decision-making and business development.
For successful modernization, the organizational culture is key and access to talent that wants to learn and use new technologies. FMIs also need to consider the optimal mix of service utilization and internal development, and whether they need to find partners with the necessary expertise and skills to achieve the best return on investments, optimize resource allocation and balance those decisions with risk management protocols.
“You need to build the foundation for how your architecture is going to change during the next 10 years and to bring in new emerging technologies,” Haglind added.
These are some of the critical aspects covered in the white paper “Market Infrastructure Modernization—Defining Your Strategy to Prepare for the Next Wave of Change”, which draws on Nasdaq’s modernization journey and expertise as technology partner to FMIs globally.
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