Capital Markets Newsletter

As far as the AI can see

Artificial intelligence, machine learning, and robotic process automation powered solutions are making rapid inroads into capital markets. It is fascinating to see how their scope and level of adoption are rapidly expanding as new and domain-specific use cases emerge by the day. We have discussed solutions leveraging intelligent automation in our recent research and have been talking about them at industry forums and internal events. Trade and conduct surveillance have been ahead of others in adopting these innovative tools. These innovations are not confined to the US; in Japan, for instance, Eiichiro Yanagawa’s research shows 60% of Japanese capital markets institutions are already using AI.

AI is also becoming an integral tool for the buy side; David Easthope talks about its role as part of the technology strategies needed to transform operations and thrive in asset management. Cubillas Ding has taken a deep dive into the buy side value chain, highlighting the reconfiguration taking place there, the structural drivers, and how to respond to them for enhanced alpha generation.

Speaking of innovation in trading specific asset classes, Brad Bailey has been discussing how fragmentation, technology, and data are creating massive innovation in FX markets. Fixed income is another critical asset class seeing structural changes, and the latest editions of Celent’s landmark European cash fixed income market sizing reports reveal that “MiFID II had a lot to do about nothing” in the European government bond market, while trading in the nongovernment bond market is undergoing a soft revolution as it incorporates best practices demanded by changing cost structures, investors, and regulators alike.

Speaking of MiFID II, another important piece of regulation — on initial margin (IM) requirements — will take effect less than two years from now, and Neil Katkov finds the final phase will represent a big bang expansion of the IM regime, which will have significant implications for market participants’ collateral management operations, as well as their technology systems.

Our recently launched VendorMatch platform continues to blossom as new vendors populate the platform every day and users from a variety of financial institutions increase their interaction, further enriching the ecosystem. We continue to cover many of the themes we outlined at the beginning of the year.

We look forward to connecting with you throughout 2019.

Arin Ray
Senior Analyst