For all its image as a hyper-competitive industry, where trading firms are locked in an electronic arms race and treat their inner machinations with the utmost secrecy, there are in fact common ties which bind capital markets firms together very strongly. Go to any industry conference in the world and 'the changing face of regulation' or 'reducing your costs and remaining competitive' will surely be the headlining acts on the agenda.
That is because they are common pain points with implications for everyone in the capital markets. In an open forum, such as one of these industry events, there is little secrecy or competitiveness hindering people's discussions around how to adapt to a new world. As a community, the capital markets has a strong history of collaboration, always rooted in a common need.
The approach and outcome of this looks a little different each time, depending on the problem being tackled and who is joining forces to take it on. The idea of a 'shared utility', one resource being leveraged by multiple competing parties, is not a new concept. For example, one of the biggest and most well-known in recent years has been Project Neptune, the fixed income trading network initiative aimed at boosting liquidity in the bond market. Project Neptune involved a consortium of 42 investment banks and asset managers working together to solve a common problem, creating a shared utility (in this case a network) that can be leveraged by all the participants.
The concept and practise of investment banks creating their own shared utility however, is not without its problems. Programmes such as Project Neptune still require significant investment of time and money from all their member firms. In addition, despite the fact that they are coming together to solve a common problem, ultimately these companies are still competitors. Their broad needs might be the same, but a utility solution can come down to some very technical, minute details. It is here that the disagreements often arise, as the differences between parties become increasingly apparent the more granular you go.
Bringing a vendor into the mix adds additional value in this respect. A capital markets FinTech firm is in itself a utility that can be shared between investment banks, to the benefit of all. They have a suite of solutions and services, some of which can act as pools of resource, to be drawn on by multiple clients for the same need. Having this pre-built service and sharing between clients, all of this contributes to a significant reduction in lead time and cost, as well as a boost in service and reliability. It also means that the client gets a service designed and built with their needs in mind, without the trouble of having to do it internally.
Extra value can be added yet again, when you consider that a FinTech firm acting as a shared utility defines its relationship with clients through a commercial agreement and agreed service levels. These are two items that have the potential to be the cause of great tension between competing entities if they were left to negotiate it among themselves.
At CSC Fixnetix we have always considered one of our great strengths to be that we move with the marketplace - we are what our clients need us to be. Over the last 11 years we have been on the cutting edge of low-latency electronic trading, moving through to large scale outsourcing and managed services as the needs of the marketplace change.
We recognise the value that the shared utility model brings our investment bank clients. As such, we seek to alleviate the pressures that firms are facing in today's capital markets by adopting the shared utility model where possible across our portfolio of services and solutions. As a FinTech utility, CSC Fixnetix can offer economies of scale on core areas of spend now becoming too steeped in expense for banks to handle themselves, service levels much higher than internal teams can reach and agility and flexibility around how the client organisation meets its needs and prepares for the future.