ISITC Europe’s Inaugural Market Innovation Summit Emphasizes Forward-Looking Innovations & Data Structures

By Lisa Iagatta, ISITC Chair

Recently, I had the pleasure of traveling to London to attend ISITC Europe’s Inaugural Market Innovation Summit. The event brought together a panel of knowledgeable speakers to discuss the most salient topics facing global financial services operations, and attracted about 150 attendees experienced in buy- and sell-side operations. We engaged in sessions covering everything from collateral management processes to market structures, and explored best practices and solutions to set the stage for success in 2019.

Not surprisingly, questions around the upcoming Brexit deal continued to circulate as our industry faces uncertainty about what the future of securities operations may hold. However, the general outlook overall was optimistic. Here are my top three  takeaways from  this year’s Market Innovation Summit:

1.     The buy-side market needs an organized data infrastructure

As we heard at our Fall Forum in September, data management has shifted to the forefront of conversation as we look to take advantage of the ever-growing wealth of information available to financial services. ISITC Europe’s event confirmed this trend will continue in 2019, and raised the outstanding question that remains as we analyze the enormous amount of metadata: What do we do with it?

Panelists compared the problem to the same lack of organization many of us may find in our closets at home, relating it to how throwing our clothes into the closet with no system of organization leaves us overwhelmed with a disordered pile on the floor. In the same way that we would organize our clothes by color, size, or style, the buy-side market needs an organized infrastructure to accommodate the quantity and maintain the quality of information available to the industry. Current data dictionaries are still not machine-readable, leaving our potential to scale constricted by the limits of human time and capabilities.

Until we develop data management structures to make sense of the abundant untapped metadata suspended within the system, we’ll drown in data lakes as daunting as the disjointed articles of clothing piled up on our closet floors. At ISITC, we plan to continue strategizing on data management best practices to allow our industry to take full advantage of the information at our fingertips.

 2.     The Greenfield Approach is emerging as an alternative to Brownfield software development

The future direction of software development was another major point of discussion during the Summit, with one of the less common strategies, known as the “Greenfield Approach,” attracting newfound attention. Unlike Brownfield software development that seeks to apply new software to existing legacy systems, the Greenfield Approach is a radical and rare method that involves creating an entirely new infrastructure to stand alongside, and eventually phase out, antiquated legacy systems. A common example of this is found in the retail banking space, where an incumbent bank builds a digital only arm on a modern infrastructure, with the goal of migrating customers to that platform over time.

The biggest advantage of this “fresh start” approach is its flexibility and agility when adopting innovative software. Completely independent from the old foundation –– which may grow outdated despite incremental add-ons and updates over time –– Greenfield solutions aren’t hindered by old code, poor design, or reduced functionality. Despite the upfront investment in time and money, this strategy could offer long-term advantages to avoid flimsy add-ons or the need to ultimately rip out underperforming legacy applications. Though Brownfield projects are still the norm, this radical new approach has drawn interest as experts hint it may be the next trend to keep an eye on in the upcoming year.

3.     The push for ISO 20022 migration is greater than ever

Recognized as the “standard of the future,” ISO 20022’s financial messaging standard allows firms greater flexibility to adapt to change as the technology landscape constantly evolves. ISO migration was a hot topic at ISITC’s 2018 Winter Forum, and with the Eurosystem Collateral Management System (ECMS) looking to migrate to ISO 20022 by 2020, the push is heightened to embrace this upcoming change..

At our Winter Forum, SWIFT shared that migration to ISO 20022 for payments will unquestionably be the way to go, and that SWIFT would facilitate the industry migration of cross-border payments and cash as firms adopt the standard. The start date of that migration will begin November 2021, so we anticipate this topic will continue to be a major point of discussion in our industry for the next few years.

The event was an encouraging reminder of ISITC Europe and ISITC North America’s aligned mission to advance financial services operations through discussion, education, and collaboration. The meaningful conversations and  the passion from all those who attended was incredible., As we prepare to celebrate our own 25th Annual Securities Operation Summit this March, we look forward to continuing these rich conversations around the topics most important to our industry.