Preparing for the next wave of change
The last three years have reinforced the importance of resilient and responsive markets to manage uncertainties and unforeseen events. The global pandemic, supply chain shortages, geopolitical tensions, high inflation and the recalibration of interest rates have driven unprecedented trading activity and volatility. For financial market infrastructure (FMI), upscaling of capacity to absorb disruptions and growing transaction volumes has been a key focus during this time.
Simultaneously, accelerating digitization across industries has fundamentally changed expectations of services, client interactions as well as data consumption in the capital markets. Together, with the maturation and diversification of digital assets and the demand for additional products, this trend has made improved agility, product creation capabilities and client centricity top priorities for FMIs to understand and respond to evolving client demand.
These factors have converged to emphasize the case for technological transformation in capital markets and infrastructure. Considering the technology development that has taken place in the past five years—including the maturity of cloud—and how it has transformed many other industries, FMIs need to think about how they can leverage modernization to capture agility and cost improvements. We are still at an early state of capitalizing on cloud technology in FMI, but moving forward it will be a key transformative enabler to continuous innovation.
Capital markets have gone through multiple waves of change since the electronification of trading in the ‘90s. We are now in the beginning of the next big wave, which will fundamentally change the data and compute model of this industry. What FMIs are preparing for now is effectively constant change during the next 10 years. Recruiting talent that wants to learn, ideate and use new technology will be important, as well as having a clear strategy to enable responsiveness and facilitate change.
An insider’s perspective: Keys to developing and executing modernization
Large transformation projects are about much more than technology. They are demanding programs that involve many stakeholders and require mobilization of staff across business and IT departments. From Nasdaq’s experience, gained over years of cloud transformation, the first step in developing a modernization strategy is to set a long-term vision for innovation. Treating modernization as a continuous process and investment area—rather than occasional large-scale overhauls—can help improve organizational agility and resiliency, keep infrastructure updated and formalize change management as a natural part of operations.
So, while modernization is crucial for FMIs, there are no quick fixes. Transformation needs to be guided by a long-term vision and strategy:
- An effective modernization strategy must consider how to achieve the best return on investments, optimize resource allocation, and balance those decisions with risk management protocols.
- It needs to involve external and internal stakeholders (customers, regulators, staff and shareholders) to gain necessary support.
- FMIs should take a proactive, stepwise approach to architecture and infrastructure modernization with appropriate testing and robust internal and external feedback at each milestone, enabled by modular platforms and microservices.
- A modern data strategy is needed to create value for internal and external users to garner actionable insights and create a strong foundation for data-driven decision-making and business development.
- Culture is key but hard to get right. A foundational transformation needs the support of employees and leaders across all levels of the organization. In addition, the ability to compete for top talent is dependent on a company’s commitment to modernize.
These are some of the critical insights explored in the white paper “Market Infrastructure Modernization—Defining Your Strategy to Prepare for the Next Wave of Change” which draws on Nasdaq’s modernization journey and expertise as a technology partner to FMIs globally. Well-functioning, trusted markets are critical to economic growth and prosperity, and FMIs need to map out their strategies to secure long-term resilience, relevance and growth. While technological innovation is not new, the pace of innovation and adoption has accelerated greatly, requiring an informed and proactive approach, optimized to best support organizational capabilities, current and evolving regulation, incumbent technology stacks and third-party services.
The white paper can be download here.
