Part 1: What the Infrastructure Needs to do
Trades and Products
Where do Trades Come From?
The Purpose of the Infrastructure
Part 2: The Problems with Trade Processing Infrastructure
The Evolution of Technical Complexity
The Regulatory Challenges
The Complexity Cycle
Part 3: Historic Approaches to Transformation
Functionalisation, aka “Factories”
The Golden Middle
Part 4: New Approaches to Infrastructure
Cloud and Utilities
Artificial Intelligence and Robotics
Big Data and Analytics
Blockchain/Distributed Ledger Technology
Distributed Ledger Technology: Hybrid Approach
The definition of genius is taking the complex and making it simple.
– Albert Einstein
A great deal of intelligence, money and hard work has gone into developing the infrastructure of firms involved in capital markets. However, based on Einstein’s definition, there seems to have been a complete absence of genius, as over the years the infrastructure has grown increasingly complex. In the last chapter we looked at the perceived problems in trade processing infrastructure, costs, control and flexibility. Ideally, every organisation would like to have lower costs and better control, but it is not always economically feasible to make the investments to achieve those goals. Nevertheless, the capital markets industry (and in particular the banks) has faced a prolonged period of regulatory change, low margins and ongoing control issues. It really does need to change, and if inflexibility in the infrastructure holds back that change, there is a problem that needs to be resolved.
This chapter will explain how the capital markets infrastructure (both within and between firms) emerged into a complex system, and why complexity itself can become a problem and a barrier to