1) Regulatory reporting: New rules demand new approaches
With a year to go before MiFID II comes into force, and the introduction of new reportable products and a number of other developments are increasing the complexity and breadth of trade and transaction reporting.
The sheer scope of MiFID II is going to require greater granularity on source and reference data. As regulators seek more transparency around the parties involved pre- and post-trade, conduct peer reporting comparisons and look for efficient reconciliation, the need for a comprehensive rethink of how firms are managing data, operational systems, external providers and costs is clear. This will require investment in:
- Enhanced and consolidated approaches around instrument identification, reconciliation and matching, and transmission.
- New approaches to reporting to reduce TCO: removing tactical, models, siloed by asset class, to a more tactical, sustainable and affordable infrastructure.
2) Blockchain: Are we nearly there yet?
Have we reached the top of the Blockchain hype curve? If you take cultural references as some sort of temperature test, then Dilbert cartoons say 'yes'. In the past year a lot of time, effort and money has been dedicated to DLT experimentation. Yet very little of it has left the lab environment and the few implementations that have hardly solve a real business problem or generate value beyond not falling over.
The challenge is no longer what a firm can do with the technology. It's potentially challenging what the firms do by dismantling and re-imagining elements of the value chain. While DLT allows us to imagine a world where all post trade activity, from issuance to redemption, becomes a series of smart transactions, 2017 should be a year of more sober development and less white paper hype.
It is also why rebuilding familiar processes on the blockchain is comforting and where the first 'wins' are likely to occur. This means finally leaving the lab and towards delivering real world applications, such as those offered by the likes of SETL.
3) Transforming the buy-side for a digital future
As global interconnectivity and ubiquitous access to financial markets increase, it is imperative that asset managers articulate their investment approach-and strengthen differentiation. Moving to digital has been slow but the pace of change should accelerate in 2017 as firms are challenged with the increasing competition for assets and mounting cost pressures.
The first step is automating processes and data management such that the information customers require-and that asset managers are required to provide-is easily available, timely and in the desired format.
As asset managers build the internal business case for creating digital hubs, they should consider the tactical benefits of increased operational efficiency. They should focus on the lifetime value of the customers most likely to engage with these hubs, as well as the strategic value of the insights derived from analyzing their actions. To do this, they must tightly integrate CRM with customer-facing digital platforms.
The ability to generate these insights and use them to create an Amazon- or Facebook-like level of familiarity and comfort with the younger generation will improve customer satisfaction, increase retention and position asset managers to survive, if not thrive, as the assets of the younger generation grow exponentially.