Operational Alpha in Capital Markets: Achieving Cost Efficiency and Resilience

Tokyo Financial Information & Technology Summit (TFITS) is the only event in Japan focused on the opportunities and challenges facing IT, data, and operations executives from financial institutions.

TFITS is a hybrid conference hosted by WatersTechnology and sponsored by six solution providers across APAC, with 25 speakers and 250+ delegates. The 2022 in-person summit was held on June 29 and featured an agenda packed with practical insights on a variety of topics, including:

• Tech Leaders Spotlight: Industry Updates, User Cases, and Business-driven IT Approach
• Data Leaders Spotlight: Trends and Innovation in Quantitative Analysis and How to Drive Business Outcome
• Investor Spotlight: Build Resilience to Your Portfolios with Extensive Automation
• Trading Panel: Operational Alpha in Capital Markets: Achieving Cost Efficiency and Resilience
• Remote Working Spotlight: Implication on Operating Models and Risk
• Cloud Panel: Migration to Cloud―What Is There to Keep from Your Legacy System

I had the privilege of moderating a main stage strategic panel discussion titled “Operational Alpha in Capital Markets: Achieving Cost Efficiency and Resilience.”

OUR ESTEEMED PANELISTS:

• Ken Utsunomiya | Operating Officer, Joint Head of Operations Group, Joint Head of Global Operations, Mizuho Securities
• Makoto Nagahori | President & CEO, Phillip Securities Japan
• Mihai Bistriteanu | Head of Securities Lending and Financing Department, SBI Securities
• Yasuaki Hayashi | Japan Representative, Torstone Technology

The only trading-focused panel at this year's TFITS in-person conference featured four thought leaders with deep knowledge of Tokyo Capital Markets. They discussed priorities for pursuing economics and efficiency in capital markets, methodologies for achieving resilience and scalability, and initiatives and challenges of the front/middle/back systems and operations departments, as well as the potential of technology with respect to addressing data-driven architecture.

Panel topics included the following questions:

• From the front office to the back office, what are the priorities of market participants in their quest for economy and efficiency?
• What are the technologies that achieve resilience and scalability? Is it managed services, outsourcing, or hybrid cloud? What are your strategies for modernizing your technology?
• Data-driven architecture optimizes data and technology use: Does the ecosystem approach reduce data/technology and operational costs and achieve operational alpha?

At the beginning of the panel, Celent gave a short keynote on Operational Alpha in Capital Markets.

MODERATOR KEYNOTE: "Operational Alpha at Capital Markets: Combining Resilience and Cost Efficiency Initiatives”

1. Why is responsiveness to change and cost efficiency important now?

• Economies and efficiencies on the buy side now
• Longing for the cloud to deliver operational efficiencies in capital markets
• Hybrid front-to-back technology, managed services, outsourcing

2. Operational alpha initiatives and strategies: rethinking the operating environment from end-to-end

• Strategic technology approach to support operational efficiency and alpha generation capabilities
• Building process integration and data enablement layers through APIs
• Create a road map for cost and operational efficiency improvements

This keynote emphasized the importance of the “data enablement layer” in the front office. It is a unified data architecture, a mechanism to enable effective use of data, and an extension of enterprise data management for the front office.

• In the front office, there is a great deal of interest in technology investments that enable the use of value-added data, alternative data (satellite data, social data, corporate public documents, etc.), and big data infrastructure to generate investment ideas and to quickly test hypotheses about some of these ideas. There is a lot of interest in this area.
• Market participants need to be clear about which use cases are the highest priority and what success looks like for front office constituents. It is important to specifically consider the front office data architecture along with the corporate data strategy and front-to-back approach.
• Modularizing the application architecture and separating it from modern standard interfaces can facilitate the substitution and use of functionality. Modern APIs (web-based, microservices) allow for more dynamic interoperability and data exchange between technology applications, reducing integration costs. This makes it possible to have a comprehensive “front-to-back” core investment infrastructure and still incorporate integrated “best-of-breed applications.”