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What's In Store For 2014?

Although markets continued to surge in 2013, this year was mostly a forgettable one for financial services technologists. CIOs are hoping for brighter IT fortunes in 2014.

For most people in the capital markets, especially those in information technology, 2013 is probably a year they would like to forget. True, the Dow is up 17% since the beginning of the year, but for most technology professionals 2013 has been another year of cost pressures and mundane regulatory and compliance work.

When you talk to most CIOs, the No. 1 priority this year was to implement technology to help their respective firms meet compliance mandates from Dodd-Frank and various regulators, including the SEC, FINRA and the CFTC. Luckily, according to one CIO, any technology purchase for a compliance project was usually rubber stamped, so creative IT leaders snuck additional purchases for other projects into the purchase orders.

Their No. 2 priority was to streamline the current application portfolio and IT architecture in order to lower operating costs to match the (usually smaller) revenue that most Wall Street firms are seeing in the current marketplace -- not exactly exciting work for developers and technologists.

[For learn more about all of the topics that will shape the business technology landscape next year, download the November Digital Issue: Capital Markets Industry Outlook 2014.]

The mundane work and constant pressure to do more with less has resulted in not so much a brain "drain" but more a brain "leak" from Wall Street. While the financial industry used to be the first choice of hotshot technologists and quantitative analysts, the prospects of getting stuck on a compliance technology initiative has some of them looking to Silicon Valley or other industries. CIOs report that while the job market is always competitive in financial services, it seems that highly skilled talent is harder to come by in recent months.

Innovation Mandate?

That said, 2014 might be the year when Wall Street firms remove the shackles from the IT group and start to reinvest in systems that could be a competitive advantage to the business. To be sure, cost containment will still be a priority and firms need to make sure that the systems they run are as efficient and inexpensive as possible. But after a couple of years of focusing on compliance and cost cutting, business units are starved for innovative technologies that can help their customers. After all, business leaders are still looking for ways to create competitive advantage for their business units, and the intelligent use of technology in innovative ways is the best way to achieve their goals.

As you will read in Wall Street & Technology's Capital Markets Outlook 2014, there is a mix of cost containment topics (outsourcing and open source hardware), topics that focus on the changing marketplace (SEFs, market structure) along with some issues (big data or public cloud) that could finally change the business next year, after a few years of extreme hype.

Whatever happens in the next 12 months, however, let's hope for everyone involved that the top priority for CIOs isn't regulatory compliance again. Instead, here's hoping there is a return to innovation and changing the way the industry does business through the intelligent use of technology. Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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KBurger
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KBurger,
User Rank: Author
11/11/2013 | 4:07:29 PM
re: What's In Store For 2014?
That is a great point, Ivy, and we are seeing this across financial services. CIOs are telling us that "human capital" will be a big area of focus -- some of this is making sure they have the right resources focused on the right things, but it's also attracting and retaining the talent with the leading-edge skills in analytics, mobile, etc.
IvySchmerken
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IvySchmerken,
User Rank: Editor at Large
11/11/2013 | 4:00:21 PM
re: What's In Store For 2014?
Mobile is one area that is ripe for innovation. Compliance is still a priority, but pockets of innovation will emerge in IT. How else will firms attract young talent that wants to work at Google or Twitter?
KBurger
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KBurger,
User Rank: Author
11/11/2013 | 2:45:22 PM
re: What's In Store For 2014?
The "we can't invest in anything else because we are shackled by compliance" is a tiresome cliche, in my opinion. Regulation in financial services is hardly new -- it always has been one of the most regulated industries (insurance even more than banking), and rightly so, since individuals' financial well-being is at stake. And no one should be "shocked, shocked!" that there is more regulatory scrutiny now -- even though of course lots of sound, compliant companies are paying a price for the misdeeds of others. As Greg points out, it falls on the CIO -- as well as other line-of-business execs -- to understand this reality and then find ways to drive innovation and other growth-focused strategies by bringing in and developing the right skills, listening to customers, and adopting enabling technologies that can be leveraged across multiple functions, needs & opportunities.
Byurcan
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Byurcan,
User Rank: Author
11/11/2013 | 1:26:21 PM
re: What's In Store For 2014?
Yes, how financial services firms can invest in innovation while keeping up with compliance will be major theme in the upcoming year.
IvySchmerken
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IvySchmerken,
User Rank: Editor at Large
11/5/2013 | 11:08:26 PM
re: What's In Store For 2014?
Firms need to address regulatory compliance first and that is a tall undertaking. We've seen in the headlines how SAC Global had to plead guilty and pay a $1 billion+ fine for failure to supervise employees involved with insider trading. So you have a hedge fund that's been lauded for its stellar investment performance and that had compliance in place, but apparently was not doing enough to rein in those seeking an "edge."
Nathan Golia
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Nathan Golia,
User Rank: Author
11/5/2013 | 8:44:15 PM
re: What's In Store For 2014?
Unfortunately, I don't see how the top priority for global financial institutions can be anything but regulatory compliance in the near future with so many markets emerging and traditional ones changing their structure all the time. The key will be balancing the "needs" with the "wants" and proactively implementing systmes and processes that take away the pain of compliance and allow for innovation.
IvySchmerken
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IvySchmerken,
User Rank: Editor at Large
11/4/2013 | 5:00:22 PM
re: What's In Store For 2014?
SEFs could create demand for a range of IT projects such as connectivity to FCMs, new data feeds, and pre-trade clearing checks for buy side clients. Even if firms don't build their own SEFs, they may be acting as market makers on SEFs, or sponsoring direct access to SEFs for their institutional customers, all of which requires risk monitoring.
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