When Dinosaurs Roamed Canary Wharf

Looking at the evolution of vendor systems in financial markets is not dissimilar to how we view the times when dinosaurs roamed the earth.

Back then (if you can say that about 140 million years ago), we had the ‘Cretaceous and Jurassic Periods’. In our own relatively short time-frame we’ve had the finance vendor system periods: the ‘Midas/IBIS Period’ (1985-1994), the ‘Summit/Infinity Period’ (1995-2004) and so on.

But what’s really changed from the vendors in that time?

Today’s systems are still, largely, risk engines of various degrees of complexity, with workflow engines that manage a trade life cycle. Once implemented at significant cost and time, they assimilate your business like The Borg, and lock you into a costly upgrade cycle. Yes, they help you scale your business. Yes, they help you do the heavy lifting. But have they become the Brontosaurus of the modern age?

There's a lot of missed opportunities. Take Collateral Management. Recently, my colleague and collateral management expert Storme Thompson held a breakfast briefing for collateral experts in London. 

Overall, the view of the meeting was unanimous – at this stage there doesn’t seem to be a proactive push from vendors to lead the charge on the next stage to transform collateral. Yes, there are systems that can value your collateral and manage your workflow. Need to manage CSAs? They can do that to.

But which vendor systems are changing the game? Who has made the shift from end-of-day to real-time? Who has the collateral platform that builds a “collateral cloud”, provides real-time revaluation, blends collateral prices from multiple sources and provides APIs to drive collateral valuation in to the pre-deal price?

Furthermore, the approach to architecture and design of vendor systems appears to be fossilised. The old two dimensional architecture grid of applications by asset class and trade lifecycle needs to be swallowed up by the tar pits. The future is understanding what needs to be put at the beating heart of a business (order management, margin, netting and collateral optimisation, etc). And there's a new way to put these behemoth systems into organisations - fast and with less risk so that you get on with running your real business.

Have any of the vendors got his right, or are they all dinosaurs propping each other up while they wait for the next comet to arrive?