Role of Technology in Investment BankingNovember 23, 2017
Today, technology is key in turning trading strategy into trading profit. Technology enables new pricing models and products to be delivered to the market. The IB industry thrives on the flow, analysis, and interpretation of information and technology is often the edge that gives a bank competitive advantage.
Technology spans across IB functions and underpins every deal that is made. When a system is unavailable, millions of dollars can be lost. So robust systems and infrastructure are more than important, they are fundamental to IB’s ability to operate & make profits.
Another challenge is the evolving regulatory burden of the financial sector. Technology has to do more than keeping up; it has to drive the changes and developments necessary to keep IB’s ahead of the competition.
IB’s rely on advanced technologies in the front office to enable high-speed and high-frequency trading. Until now, the upfront benefits from this activity have been so enormous that the complexity and inefficiency of post-trade processes and systems have often been overlooked.
This is changing at a fast pace. The highest performing investment banks are now using their front-office technologies in bold, innovative ways as a source of competitive advantage for the whole business. By concurrently enabling interdependent business functions, such as risk management, settlement and financial reporting, these technologies are transforming the way organizations ‘think’, ‘react’ and ‘operate’.
There are a number of reasons for the change in this trend:
• Management requires integrated, proactive technology infrastructures that can anticipate the impact of new market and regulatory developments and adapt to the same.
• Technical leaders are under mounting pressure to get a return on their massive investments in technology by using these assets to drive down costs, as well as increase revenues (traditionally the principal focus for front-office technologies)
• This increasing emphasis on ROI means Technology leaders need to develop flexible IT systems/assets, that, by adapting to business change, can appreciate in value over time.
Understanding complex technology is one aspect, but a firm grasp of business problems is also essential. IB technologists work closely with the sales, trading floor, middle office operations to develop the software that enables them to make the split-second decisions or use their creativity and initiative to enhance state-of-the-art front-to-back systems and databases. Whatever the task may be, IB technologists work in a fast-moving environment where solutions move from concept to implementation in weeks and months rather than years.