Three in five financial institutions cannot perform real-time reconciliation because they haven’t started working on it for any of their asset classes, according to a recent survey. And they don’t think they’ll be ready to start work on this regulation-essential project before the end of next year, stated the survey by London-based software solutions provider Gresham Computing.
Impending regulatory regimes, such as the Dodd-Frank Act and Basel III, could soon require different systems to adopt new reconciliation requirements, assuring that proper collateral amounts get delivered. But almost half of the survey respondents in New York and London indicated that they expect delays to inter-system reconciliation.
The Price of a Watchful Eye
Real-time market surveillance may not be moving so slowly. It is increasingly significant to market participants, according to Alexander Tabb of TABB Group, especially if the capital markets adopt solutions from the likes of NICE Systems’ acquisition of Redkite Financial Markets.
“Redkite’s nuanced approach has been to focus on the front-office behavior and let the technology follow suit,” Tabb wrote in a blog post. “The challenge, of course, is that front-office behaviors are constantly changing; thus, you need to have some deep pockets to make sure your technology evolves appropriately.”
Simultaneously mapping many of the market’s behavior types, as opposed to only a few, is extraordinarily challenging, Tabb noted. It entails teaching machines to think and react like rational traders, which is a costly endeavor.
“As with any dynamic system, activities are constantly changing — methodologies evolve, and what was new yesterday is old today, and nobody knows what new types of activities will be enabled tomorrow,” Tabb said. “NICE … will need to follow up its investment in the Redkite product with sustained development and backing.”
Future Sticker Shock
NICE and its customers will need the discipline to keep up with evolving behaviors and technology, which may be trickier than it sounds when future technology needs are on the line. Shortsighted budgeting is one of 10 data center mistakes businesses are making, according to TechRepublic’s Jack Wallen.
“When you budget, make sure to have an idea of what your needs will be in the next five or 10 years,” Wallen said. “Always assume you will grow, and go with projected numbers, not current numbers.”
Driving innovation and performance into the future via real-time data platforms will be the subject of a Webcast on Tuesday hosted by SAP’s Neil McGovern and IDC’s Carl Olofson. “Leveraging Integrated Data Platforms in Financial Services” will also discuss how organizations are already making the most of decision cycles and customer insights with real-time business intelligence solutions powered by in-memory technology.
The Road to Real-Time
Firms can dream up all kinds of reasons not to invest in real-time reconciliation, market surveillance or data platforms. But any excuse pales in comparison to the pain associated with running afoul of the law or falling hopelessly behind the competition.
These are necessary costs of the participating in the capital markets. And they are investments in regulatory compliance, as well as gaining a competitive edge against rivals.
Catching up — if you can do it — will only be more expensive down the road.
“Dealing firms not ready for real-time reconciliation – survey” by Richard Henderson
“Real-Time Market Surveillance in Play” by Alexander Tabb
“10 mistakes you might be making with your data center” by Jack Wallen