Revenues across securities services have effectively flatlined over the last decade, with a report by McKinsey showing the industry had grown by just 3% p.a. since 2010, as it faces a surge in regulatory costs and client pushback on fees. Responding to this challenge will require the industry to channel resources into technology and digitize many of the manual processes in the securities transaction chain. By facilitating automation and removing intermediation, growth in the securities services business could accelerate.
Panelists at The Network Forum in Vienna (25-27 June 2018) acknowledged that while disruptive technologies such as blockchain and artificial intelligence (AI) had a role to play in the industry, their integration into systemically important infrastructures needed to be well risk-managed. Valerio Roncone, Head Product Management & Development, Member of the Management Committee, Securities & Exchanges, SIX, said the Swiss exchange is a systemically important financial institution and subject to heavy regulation. The rollout of such disruptive technologies requires adequate operational insight and experience.
If technology change is applied badly at systemically important financial institutions with little forethought paid to interoperability or risk, markets could grind to a halt. Another panelist concurred, although he added it would be prudent for large institutions to adopt a continuous technology change program, carrying out incremental developments on a monthly basis to keep pace with evolutions in the market – an approach which would also help mitigate the costs and risk of executing large one-off system upgrades.
Having once been mesmerized by the opportunities offered by technologies like blockchain, many industry participants are now becoming more pragmatic, recognizing that clearing, settlement and custody will not be disintermediated by these innovations anytime soon, a point made by Valerio Roncone. Disruptive technologies have the potential to remove surplus costs from some manual processes, but providers attending The Network Forum appear to be taking a conservative approach towards implementation given the high risks involved.
The hunt for value in a commodity industry. Where do post-trade services go from here?
As the services the industry provides become increasingly commoditized – clearing, settlement, custody, collateral management, fund processing are just some cases in point – new and more nimble players are entering the spaces the industry once defined.
Are new technologies really going to reshape the securities services industry over the next decade?
Will robots now start talking to our clients?
Artificial Intelligence (AI) is rapidly becoming an integral part of client experience across a range of industries – some experts estimate that AI will have surpassed human intelligence by 2019!
Technology – driver of tomorrow’s post-trade world?
Post-trade service providers, driven by the growing importance of technology and evolving investor needs, are undertaking major reviews and upgrades of their system and operations environments.
The challenge of duplication
Thomas Zeeb, CEO, SIX Securities Services, was the recipient of Global Custodian’s Lifetime Achievement award earlier this year. Here he speaks with Richard Schwartz about whether the post-trade world can move beyond the search for scale.