Capital markets represent a key participant in the modern global financial system. They trade in long-term debt and equity-backed securities as part of their operations. Traders, banks and bankers, investors, financial institutions, central banks, and financial market regulators represent key participants in such markets.
We will examine some market trends that will impact capital markets in 2019.
- Intelligent Automation:
The imperative to drive customer engagement is encouraging players in capital markets to use automation technologies. These include intelligent trading process automation, data-driven compliance, and automation to reduce operating expenses, systems to reduce trade completion time, and systems to cut the scope of errors in post-trade settlement processes. In addition, machine learning technologies are helping market operators to streamline complex buy-side and sell-side transactions; while artificial technologies are empowering risk managers to arrest fraudulent market activities in real time.
- Robotic Processes:
Automation in capital markets and the financial services sector has helped market players to achieve tangible gains in domains as varied as investment management, underwriting, and claims payments. Automated bots represent part of robotic process automation (RPA). To this end, some banks have deployed forms of digital automation to offer premium, real-time intelligence to clients about the performance of their financial portfolios. RPA reduces manual effort for low-value tasks, saving costs and improving efficiency. We will see a rise in this trend in 2019.
- The Cloud:
Cloud technologies will have a huge impact on capital market operations in 2019. Many players in this space are actively endorsing and deploying cloud infrastructure with a view to compete with peers, drive higher cost efficiencies, and improve their data processing capabilities. Cloud technologies also enable capital market players to rapidly scale business operations, achieve cost-effective compliance with regulatory mandates, and enhance collaboration with various partners in the marketplace.
Capital market operators are relying on micro-services in a bid to improve technology deployment, boost standards of delivering services, and reduce the risks and costs associated with monolithic systems. Such deployments may gain pace in 2019 because these services reduce the chances of catastrophic single-point failures. Micro-services also allow capital market players to reduce overhead costs, become more responsive to regulatory demands, and breathe new life into mission-critical applications. They minimize or eliminate operational interruptions or failures and this is a massive benefit.
- Smart Contracts:
The use of digital smart contracts enhances transparency in capital market transactions. Smart contracts, based on distributed ledger technology such as Blockchain, can benefit the entire ecosystem of capital markets. This form of digital technology drastically reduces the scope for manipulation in capital market operations, and cuts the scope of errors in trade executions. Capital market operators gain additional benefits because the widespread use of smart contracts will improve compliance mechanisms, boost cost efficiency, and reinforce accountability in capital market operations.
Key players in world capital markets are working to allow their clients greater access via digitally-mediated electronic platforms. Trading desks have launched various platforms in a bid to upgrade the customer experience via intuitive user interfaces. Ergo, platformification has allowed capital market operators to reduce overhead costs, elevate the level of customer services, design new revenue streams, and execute shorter development and deployment cycles. This trend also allows market players to bypass the costs of upgrading legacy infrastructure and ensure higher levels of regulatory compliance.
- Quantum Computing:
This aspect of modern computing has the potential to enhance the speed and velocity of complex transactions in modern financial markets. Quantum computing systems will likely translate into low request times for database searches, execute faster risk analysis, boost financial forecasting methods, and improve the overall level of portfolio management practices. Some players in modern capital markets are collaborating with technology firms in a bid to apply quantum computing to the creation of new trading strategies, portfolio optimization, asset pricing, and risk analysis.
- Data Governance & Management:
New regulatory diktats have driven a sharp focus on data governance and management practices. The European Union’s General Data Protection Regulation seeks to ensure complete data protection for all operators in capital markets. The recommended practices will ultimately help market players to safeguard brand value, reduce the risk of reputational damage, avoid consumer lawsuits, retain client trust, and gain new consumers. Consequently, major players in capital markets may ramp up internal review processes ad initiate a drive to achieve advanced information governance systems.
As you can see disruptive technologies such as AI, RPA, Blockchain and regulations relating to governance are reshaping the future of capital markets. At Triassic, we have extensive experience leveraging these disruptive technologies to digitally transform organizations for greater success. If you’d like to explore such disruptive and innovative solutions for your organization, please contact us.