January 14, 2014

It is now quite commonplace to say that the world of capital markets has entered a new normal post crisis. And one wouldn't be far from reality when one makes such a statement. The two speed world of fast growing nascent markets in BRICs and slow growing matured markets of the developed countries is here to stay. Regulators are fundamentally compressing traditional margins enjoyed by banks, asset managers and insurers through stricter capital adequacy norms. Investors are shifting their focus to new asset classes (passive, alternate) and new distribution channels (RIAs) in a manner that is unprecedented.

Ranjit Tinaikar, Thomson Reuters
Ranjit Tinaikar, Thomson Reuters

However, when I asked the question: "Have we changed the way we use information and information technology in the new normal?” to a table of senior executives the answer was not convincing. In fact the answer was pretty much the same as I met senior executives across Asia, Europe, Middle East, USA, and Canada.

The fact is that much of the core technology used by capital markets professionals in making their trading or investment decisions were developed in 70s and 80s. The "desktop" is still the center of the capital markets professional solution even as the rest of the world is going mobile. For the most part, senior investment and trading professionals still operate systems that are based on mnemonic based codes that are hard wired into their brains through many years of use — even as their sons and daughters are wired into the world of Google and Apple. While revolutions have been triggered and lives saved through innovations in open collaboration and connectivity, the world of capital markets is still operating in a world strait jacketed by closed architecture platforms and solutions.

The potential for harnessing the power of technology innovations in the new normal are tremendous. In a world where the search for alpha is intensifying every year, open architecture data platforms can deliver insight to investment professionals by accessing new content sources and analytics much in the same way an iPhone allows access to multitude of applets. Why should a single closed architecture solution hold your insights hostage — as is the case today?

Why can't professionals access data as their children would through their search engines? A portfolio manager in London noted: he was unable to test the full range of his ideas because it was too hard to access the data, perform the analysis and view the output. What if all of this could be done in 30 seconds? What if you didn't have to remember the specific execute commands — what if you could use natural language? The application of search engines to data analysis would be immense.

A CEO of a major mutual fund in Asia commented: "Why do I need to pay for a Mercedes when all I need is a Honda Civic?” He was referring to the fact that he did not access more than 90 percent of the data and analytics available to him on the solution he was using. The appropriate question would be: "Why aren't you able to ride your Mercedes like it should be?" Navigation through the solutions space and associated user experience can significantly enhance user productivity. How often do we hear an Apple user complaining about under use? The fundamental leapfrogging that Apple has enabled in user experience can be leveraged for professional users in capital markets too.

A trader for a hedge fund once told me that he did not take a bet on the Euro till he saw Draghi get on screen and signal the support of ECB to protect the Euro. "I didn't trust the News briefings, I needed to hear him, see his body language for me to make that call". Video is a powerful source of insight that is woefully under leveraged in the world of capital markets professionals. The world has long since recognized the power of YouTube — why can’t we have a YouTube for capital markets professionals grappling with making sense of the uncertainty that characterizes the new normal.

An analyst for a major sell side research firm following the auto sector said, "We will actually go to meet the auto dealers in Shanghai to understand growth trends. However, while we are going mobile, we don't see a single solution that is truly seamless across mobile and desktop devices". It is indeed time to unshackle the user from the desktop as workflows become increasingly mobile.

One could argue that the world of capital markets professionals is far too regulated and fiduciary responsibility of users is much higher compared to the world of Google, Apple, Facebook and others. And they would be absolutely right in pushing for a more measured use of innovation. But this is not a case of using Twitter to make decisions on someone's retirement funds. It is to say, that the new normal presents an excellent opportunity to unleash the power of innovations that are proliferating our lives. Leveraging these innovations can go a long way in enhancing the effectiveness of processes and decisions in the new normal of capital markets.

-Ranjit Tinaikar is Managing Director of the Advisory and Investment Management team at Thomson Reuters. His team is responsible for all desktop and feeds products, including Eikon as the primary desktop and other content offerings such as Lipper and Starmine, that are sold to the full range of users globally: analysts, quant specialists, portfolio managers, marketing and sales, product development, and wealth advisors.