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Transforming trade data: unlocking value through amalgamated analytics

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Wholesale financial institutions are turning to new, streamlined ways to manage and report on trade data, to cut the cost and complexity of compliance - and of unwieldy IT estates. But there are some valuable upsides to this approach too. With a credible master data set from which everything else flows, market operators have new insight into their fuller business performance, which they can use to drive better business decision-making. Mike Bagguley, former COO of Barclays International and now a board advisor to Inforalgo, considers where the road to enlightenment might lead.

In Capital Markets, financial institutions are grappling with a growing regulatory burden which demands more proactive surveillance of their conduct and more detailed and immediate trade reporting. But the traditional piecemeal approach to trade data treatment is unsustainable. Collating and preparing data for regulatory compliance purposes has become a costly and full-time job.

At the same time, the IT systems on which all of this depends are unwieldy, complex and expensive to maintain, something banks are anxious to address as they strive to improve overall performance in challenging market conditions. IT rationalisation, and data consolidation and integration, are high on the agenda, with a view to making activities such as regulatory reporting more repeatable and efficient to manage – for instance, via greater automation of data validation and report preparation.

As they progress these plans, wholesale banks are beginning to appreciate that there may be an additional and fairly significant opportunity here too - to create something that adds value for the business. If they can consolidate their trade data management in the cloud and create high-quality master trade records, they will gain access to a very valuable business resource that could be put to use in a number of additional ways. This could help them close the gap between wholesale banking’s use of business data, and B2C’s more advanced and strategic data use.

Analysing opportunities more closely

In retail banking and credit card provision, as indeed in many other consumer-facing industries, organisations already routinely combine transaction records with customer data for deeper analysis. It helps them to spot trends in customer activity, and determine where their most profitable business is coming from. Conversely, it can help them spot poorly performing sectors of the market and accounts which are much less profitable. Armed with these insights, organisations are able to target their promotional activities more precisely, to win more of the business they really want.

They can also provide useful feedback to product development teams, to help inspire more attractive propositions for customers which the business has previously struggled to reach or convert. Such activity also aligns well with organisations’ commitment to better business conduct and improved customer outcomes.

In investment banking, institutions would benefit greatly from equivalent targeting sophistication, but historically the supporting insights have been lacking. Teams are unlikely to be able to see, at a glance, how the organisation has fared with insurance companies in France, for instance, or whether it might be performing poorly with car manufacturers in Germany relative to the opportunity.

This kind of visibility would require a clear line of sight across all of their current and historic trading and client activity. Yet the way they have procured IT systems has not been conducive to this. Commonly, financial institutions have tended to put in a new function-specific IT system, or sign up to yet another specialist third-party service, each time there has been a new business or regulatory requirement, copying across a set of trade data for it to work with. In the process, they have created costly new information silos.

All of this is set to change for the better, however. Today, cloud-based software services are accepted as being a secure and viable alternative to managing business applications internally. This means financial institutions can now entertain the possibility of consolidating complete, clean, definitive trade records to a single source, accessible via a single central online hub. One that might serve multiple different use cases.

With a credible, live master data set - the approved, reported version of the trade -  it becomes possible to streamline a whole range of critical business processes, from regulatory reporting to trading and market surveillance, to detailed business analytics. This paves the way for Capital Markets operators to appreciate and exploit the bigger picture emerging from all of their trade activity, and be smarter about the opportunities they pursue and in the way they target their resources.

Creating a 360-degree business view

To become better-run businesses, financial institutions need a more detailed picture across all of their activities.

But this means integrating trade flows with other data sources - such as revenue and profit performance data, client relationship management records and even client electronic communications (important for comprehensive trade surveillance/detecting insider trading or market manipulation). Although, more organisations do now use online software tools like to collate and organise client information, there needs to be a link between this data and actual trade records.

Using a cloud-based trade data store maximises the options for integration and onward actions from a single, integrated, credible, current master data source – one that spans all asset classes and has links back to fuller client account information, and broader business performance data.

Cloud-hosting also makes it easy for all teams to access the insights they want to look at from wherever they are in the organisation, anywhere in the world. So financial institutions can start to thinking about managing everything, including compliance, risk, business analysis, and even end-of-day financial reporting, from the same single set of clean, certified and up-to-date data.

Better still, they can achieve all of this without the continued need for huge, unwieldy and costly IT estates – resulting in savings which could run into millions, annually.

Over time, we are likely to see more institutions realise the value of consolidating all of their trade data management and reporting via a single, optimised cloud-based service, so they can rationalise their out-of-control IT estates, and use their data in new, high-impact ways. Certainly, the future for trade data management will be simpler, leaner, smarter.

Mike Bagguley, advisor to the management team, Inforalgo

The author is financial technology expert Mike Bagguley, former COO of Barclays International and now a board advisor to the management team of capital markets data automation specialist Inforalgo.