Identifying tomorrow’s problems today

Many financial services professionals transitioned to remote working with relative ease during the early weeks of the coronavirus outbreak. But for bank traders and asset managers, the pandemic proved to be a difficult transition


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As traders and asset managers started working from home early on in the coronavirus pandemic, difficulties began to emerge. In March, a Bloomberg report highlighted the issues in interviews with bond traders from Columbia Threadneedle and Thornburg Investment Management. 

The traders flagged how fixed-income trading had been disrupted by home working because price formation was so much slower.

It soon became clear that while banks and asset managers had been focused on disaster recovery sites to protect against their main office ever being compromised, they had not foreseen a scenario where working from any site would be a problem. It was what technologists call a single point of failure, or SPOF.

“Buy-side and sell-side institutions were facing an unprecedented scenario,” says Philippe Dudon, chief operating officer at derivatives platform Trad-X.

“Previously, working remotely from home was seen as a last resort. Many banks had back-up offices set up, but people had to change the way they worked almost overnight. This shift in practices naturally had an impact on how trading was conducted in the early weeks.”

Chris Walsh, chief executive at AcadiaSoft, agrees. “Traders had to adapt quickly,” he says. “Both buy and sell-side firms made drastic changes and had to adapt to brand-new ways of remote working.”

Adapt they did. Research conducted by J.P. Morgan, reported in the Financial Times, shows how the trading of US Treasuries changed as a result of the crisis. In the two years prior to the pandemic, only 50 per cent of trading in this market had been executed electronically. But by June 2020, this soared to 77 per cent.

Identifying future issues

Months on from the initial coronavirus outbreak, organisations are evolving their approach to identify future SPOFs. Financial technology experts say broadening cybersecurity perimeters may be a relatively easy problem to solve, but managing other operational risks will need dedicated resources and planning.

“Operational risk will be minimised through investments in greater resiliency and scalability,” says Walsh. “Financial businesses will be under increased pressure to reduce costs and use mutualised services or platforms that can usually assist in this goal.

“With video conferencing now becoming mainstream and mission critical, the capabilities will need to become more widely and more seamlessly integrated with apps to make workflows more interactive between users. This may cause some challenges with interoperability between platforms, but technology will have to adapt.”

Workflows are key

Adam Toms, former global head of electronic trading at Nomura turned chief executive at OpenFin Europe, explains that financial institutions will need to look closely at workflows to identify potential weaknesses.

“A common challenge has been the physical workspace moving from six screens to two,” he says. “With this comes the need to incorporate all the desktop applications necessary for a trader’s workflow. How can they access these technologies, take advantage of the problems they solve and put them to good use, while minimising the screen real estate they consume?”

Toms says companies have realised the need for contextual workflows, which link applications together dynamically.  “Application interoperability is a key focus for the marketplace right now,” he says.

While technology can improve processes, it also needs to be sufficiently robust, accessible and flexible for the demands of the workforce. The pandemic highlighted that some traders were unable to use systems as they normally would do because they were working remotely.

Reach for the cloud

To prevent system failures in the future, some answers may lie in making better use of the cloud, says AcadiaSoft’s Walsh.

“Firms will be increasingly reliant on cloud apps to provide workforces with access to applications from remote locations,” he says. “This will also ensure regular system upgrades without the need for heavy-duty maintenance or disruption to service. At the same time, secure electronic authorisation rather than wet signatures will become the standard and replace the need for paper signatures.”

Of course, while looking for possible chinks in their armour, firms will need to consider whether they have the tools and automation in place to improve operational efficiency continually.

Firms will be increasingly reliant on cloud apps to provide workforces with access to applications from remote locations

“Access to real-time data to view, understand and correct errors and inefficiencies within the trade life cycle will be crucial,” says Walsh. “Creating industry-wide standardised processes wherever possible is even more important in a remote environment where manual methods are difficult or in some cases impossible to perform.”

To find out more, read Resilience in Financial Services