Capital Markets 2016: Data, Disruption and Regulation
RESTON, Va.–(BUSINESS WIRE)–
AG (Frankfurt TecDAX: SOW) today shared its predictions for capital
markets in 2016, derived from its expertise, market observations and
interactions with its customers.
Nigel Farmer, solutions director for capital markets at Software AG
said: “Capital markets are in a state of flux thanks to new regulations
and disruptive competition from fintech, so 2016 will be the year that
defines the way financial services companies can move forward. The new
landscape means they have to get creative to address new competition
while still remaining in compliance. I believe there are five key trends
that will occur in 2016.”
1. A compliance officer will go to jail
In 2016, a compliance officer will go to jail for not stopping an
illegal act executed by one of his or her colleagues. Regulations,
including MAD II (Market Abuse Directive) and MAR (Market Abuse
Regulation), hold compliance officials responsible for anyone in their
companies for breaking the law, which means criminal sanctions. The
pressure on an already tight labor pool may send potential applicants
elsewhere, even as compliance officers head for the door.
2. Capital market firms will be buried in data
Data requirements for reporting transactions, risk data aggregation and
reporting (Basel Committee on Banking Supervision 239), communications
surveillance and swaps data repository reporting are creating a
bureaucratic nightmare for capital markets firms. Few are prepared to
handle the basic regulatory requirements, never mind take advantage of
what could be useful for market monitoring and transparency. The ability
to analyze and act upon the data before it becomes stale and loses value
will be a key differentiator for capital markets firms going forward.
3. Blockchain technology will transform capital markets
Blockchain will evolve from something banks are suspicious of to “the”
disruptive technology that will totally transform the banking system,
eliminating the need for securities depositories and central clearing,
and reducing settlements delays. One report
notes that blockchain could cut up to $20 billion a year off of a bank’s
infrastructure costs. Blockchain will also help to nail money launderers
through its distributed ledger and the historic traceability of funds.
4. Predictive Analytics will destroy insider and rogue trading
Regulators and financial services firms will monitor trades and traders
to spot aberrant behavior and anomalous trades, using streaming
analytics with predictive analytics models on top. This way they will be
able to predict, with a good deal of certainty, when something bad might
happen; insider trading, market manipulation, even money laundering will
be halted before markets are affected.
5. FinTech will begin to disrupt investment banking
While financial technology companies have already disrupted retail
banking and investing business models with lower cost banking and
financial planning websites, they have only scratched the surface of the
behemoth investment banks’ businesses. This will change
in 2016 as fintech firms begin to target and invade wealth management,
private investment and small business lending, beginning in the U.S.
“Capital markets will begin to see some real disruption in 2016. The
financial services firms that are prepared for the onslaught of new
rules and data, and are proactively embracing fintech, are the ones
which will still be there at the end of 2016,” concluded Farmer.
About Software AG
AG empowers customers to innovate, differentiate and win in the
digital world. Its products help companies combine existing systems
on-premise and in the cloud into a single platform to optimize and
digitize their businesses. The combination of process management, data
integration and real-time analytics in one Digital
Business Platform enables customers to drive operational efficiency,
modernize their systems and optimize processes for smarter
decision-making. Building on over 45 years of customer-centric
innovation, Software AG is ranked a leader in many innovative IT
categories. Software AG has more than 4,300 employees in 70 countries
and had total revenues of €873 million in 2015.
Software AG, 11700 Plaza America Drive, Reston, VA, 20190
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