T+1 and other top tech takeaways from SIFMA Ops 2022
We recently headed down to Phoenix, AZ to attend the 49th annual SIFMA Ops conference. It was great to meet operations professionals and discuss the key data challenges facing the industry. There was a lot on the agenda at the event and certain topics dominated the discussion.
Here are our top technology takeaways from SIFMA Ops 2022.
Do operations teams have the tech to tackle the move to T+1?
The move to a T+1 settlement cycle for securities transactions in the US was without doubt one of the biggest items on the agenda at SIFMA Ops 2022. This is the year of research and budgeting, ready for implementation in 2023 and testing ahead of the March 2024 deadline.
The change will bring some significant benefits around reduced credit, market and liquidity risks. But a lot of people are asking: is the back office ready?
Operations teams will have to process trades twice as fast. The post-trade function will now have one day to enrich trade details and verify the trade economics. This requires sourcing data from a variety of different systems. Errors here could see the settlement window missed and the trade failing, with both parties disagreeing over the details.
Post-trade teams are already struggling with surging volume and a move to T+1 increases the workload further. This strengthens the case for the back office to move away from inflexible legacy systems and opaque, error-prone spreadsheets.
These tools simply don’t offer the speed or agility required to process trades fast enough. For instance, they make it difficult to quickly and accurately identify and resolve breaks in trade reconciliations between brokers and counterparties.
What can firms do about this? They need to ensure they have the right tools to empower their post-trade staff to perform their role much faster. Machine learning can help here. Algorithms learn from previous actions taken by users and are able to suggest what action should be taken with regards to new exceptions.
These can be reviewed by a member of the team and implemented in bulk. We believe in keeping a human-in-the-loop; machine learning can make recommendations but those should still be reviewed by a person. This keeps you in control and ensures visibility over how you are processing data.
You can download our report, Machine learning: post-trade’s white knight?, to learn more about its transformative impact on the post-trade space.
There was even discussion around the potential for a move to T+0; a development that may require the latest in blockchain or distributed ledger technology (DLT). Which leads us nicely onto…
The evolving role of digital asset technology in finance
Are operations departments ready to handle closer integration of digital assets in the world of traditional finance? This was another key topic at SIFMA Ops.
Investing in digital assets is the most obvious way that capital markets firms come up against the technology. But the evolution of finance could see blockchain and DLT incorporated into traditional areas. As we mentioned above, it’d be necessary in order to settle traditional securities transactions in a T+0 timeframe.
Plus, the White House earlier this year instructed the Federal Reserve to start considering a digital dollar. This could mean firms would need to process blockchain data even if they aren’t involved in cryptocurrencies like Bitcoin or Etherium.
Many firms will find this difficult, especially if they are still dealing with legacy systems. These solutions often struggle with traditional finance data – for example, involving complex derivatives products. Dealing with blockchain data will require a move away from schema-based systems that are hard-coded to accept only data that meets a specific format.
Operations teams need platforms that can span the breadth of fiat and digital asset data. There will be many instances where there is a need for both. For instance, firms may have to reconcile internal ledgers against the golden source of truth on a blockchain.
This requires a more flexible and agile approach. Digital asset data can’t be dealt with in isolation – the last thing operations teams need is another point solution or ten. The good news is that once that initial difference in data format is overcome, managing digital asset data requires a very similar process to fiat.
Futureproofing operations by upskilling employees
Technology helps financial firms solve a lot of problems, but what does it do for the people using it? Lots of people touched on the employee experience at SIFMA Ops. We’re in the midst of digital transformation, the Great Resignation and the war for talent. It’s never been more important to ensure staff are equipped with the right tools to do a meaningful job.
Which is why there was a lot of talk around upskilling employees. This means equipping existing staff with the skills they need to thrive in an evolving workplace. They need to feel confident navigating the different tools they have to use.
This is particularly challenging given the current rate of innovation in financial services. Firms are exploring the benefits of cloud computing, machine learning, no-code applications and Robotic Process Automation, to name a few. There’s a lot to keep track of.
Employees must be empowered to utilise everything technology provides in order to unlock the full benefits for the business. One way of doing this is the so-called citizen development movement. This means providing tools that employ no-code functionality, giving non-technical staff the ability to build the applications they need themselves.
No-code tools can put power back into the hands of end-users, often to the relief of overburdened IT teams.
On top of giving more power to employees and improving job satisfaction, no-code tools help the business become more efficient and agile. The people who understand the use case the best are the ones who can create the solution. For example, data experts can build processes from scratch in Duco using dropdown menus. They no longer have to write lengthy requirements documents for IT to develop.
Technology that solves business problems but makes life harder for staff is going to have a negative ROI in the long run. This is especially true since the pandemic has prompted many people to rethink their work/life balance and seek more fulfilling opportunities.
Agile tech is the key to building the future of operations
Technology has a big role to play in the future of operations.
The move to T+1 has some significant payoffs, but there are hurdles for operations staff to overcome before those benefits can be unlocked.
Blockchain and distributed ledger technology is making a big impact on the world of finance and every institution needs to be ready to handle this very different type of data. It could one day provide the foundation for even the more traditional products they’re used to dealing with.
Meanwhile, organisations are aware that today’s workers want meaningful, engaging experiences more than ever. They are actively looking for ways to provide these and there are tools on the market that can help.
Change is a big part of financial services. Firms need to be able to react and adapt fast. Both firms and their employees have a lot to gain from technology, providing they are using the right tools. The wrong technology acts as a blocker to progress, but with the right technology and the right strategy firms and their staff are in a strong position to thrive, even in an uncertain future.
For more information on how Duco can help you tackle your operational technology challenges, visit our solutions page.