Feeling the Crunch of New Regs

"This is not your father's Oldsmobile" was the tagline the American automaker popularized back in the late 1980s to attract a new breed of drivers. I can't help but think of it as I look at the impact of the regulatory reform on the trading floor landscape. Let me explain.

Over the last few years, IT heads of financial market companies have had their hands full dealing with market uncertainty and the increasing complexity of the solutions that they need to support for the business. Their biggest concern though, has been staying abreast of and compliant with new regulatory policies being enacted both domestically and globally.

As a result of the recent market crisis, regulators around the world have been empowered to bring about a wide array of new policy initiatives in an effort to prevent similar market collapses. In the U.S., the impact and potential impacts of the Dodd-Frank regulations, which will go into effect in July, are still being analyzed, but as one regulator has suggested, "There is more regulations within Dodd-Frank to implement alone, than in the entire history of U.S. financial regulations before it."

Internationally, MiFID II and Basel III, which will also be applied in North America, are still in the process of being completed, but the advance briefs showcase the wide expanse that those new regulations will cover.

Most IT leaders at banks recognize that their legacy systems are inadequate to support business growth in a more regulated environment. Significant investments in new platforms or in updating older platforms will be critical as nearly 25 percent of trading floor managers are expected to devote a large portion of their IT spending to upgrade compliance technology this year. Another 20 percent will focus on updating their trading system technology to enhance the performance and collaboration of their trading platform.

Based on many of the global initiatives, the need for more transparency and oversight between portfolio managers, research, analysts, compliance officers and traders will require faster and easier methods to communicate across the trade lifecycle. This, in turn, will mean increased access to the morning calls and hoots for consistent and timely distribution of information to ensure that everyone engaged in the trade is in synch.

Collaboration between the front, middle and back office will need to be more seamless than ever before because of the plethora of new policies on trade reconciliation. Trade tickets will require much greater detail, coordination and oversight as the need to share more information and richer details become paramount.

Additionally, businesses will continue to look to develop and drive more innovative and complex financial products -- including multi-asset trades -- to capitalize on higher margin revenues. As these financial products continue to evolve and grow in complexity, the need for greater oversight and engagement with research and analyst, reconciliation and compliance teams will prove to be crucial step in understanding, approving, booking and closing highly complex deal tickets.

Businesses will need to consider solutions that are designed not only for traders, but for all the people involved in the trade cycle. Each of these users needs an endpoint device designed specifically for their needs: turrets for traders, platform edge devices for analysts and compliance, intercom devices for research and reconciliation, and soft-phone devices for remote users. Furthermore, consolidating these endpoints on a platform allows its ease of deployment and administration while ensuring specific compliance initiatives are managed through a single management system.

Markets and regulations will continue to evolve over time and therefore firms need to partner with solution providers that address both current and anticipated challenges.

After all, the trading floor of today is no longer your father's Oldsmobile

Bart Bartolozzi is a senior official at IPC Systems.