Banks Eye More Open Source in Light of Covid-19

It was little more than a decade ago that former Goldman Sachs programmer Sergey Aleynikov was first prosecuted—and subsequently exonerated—on charges that he had stolen high-frequency trading code from the bank. At the time, the programmer countered that he was only trying to strip out open-source code that he had added, before returning it to the open-source community. Despite this, Aleynikov spent a year in jail before his conviction was reversed—only to have his conviction reinstated in 2015, and be exonerated for a second time in 2017.

How times have changed.

While open source was once considered taboo on Wall Street, it has become one of the capital markets’ favorite toys. A number of factors—including ever-looming competition from Big Tech, common industry pain points, and unforeseen complications such as the coronavirus pandemic—have inspired sell-side firms to look at open-source technology in a new light.

“If the coronavirus has done anything in tech, it has put a microscope on the fact that those who are digitally advanced are advantaged,” says Alejandra Villagra, global head of Citi Velocity, Citi’s trading platform for FX, cash and options. “We must connect to our clients [and] each other seamlessly. And overnight, that [was solved with] technology.”

Citi has created one of three new open-source contributions made to the Fintech Open Source Foundation (Finos). The project, named DataHub, marks the bank’s first open-source contribution to the foundation. The hub is a set of Python libraries dedicated to the production of synthetic data for use in tests, machine learning training, statistical analysis, and other related use cases.

• Read more: Finos is reaching out to regulators to determine where open source could ease regulatory burdens on financial institutions, while keeping them competitive with tech companies. Click here to read more.

DataHub stemmed from Citi’s Engineering Excellence Program, an initiative that throws some of the bank’s biggest, most intractable problems at its top talent, who try to come up with solutions, Villagra says. The engineering team built DataHub as Citi was seeking ways to anonymize its sensitive data when working with cloud providers.

Open source, says Villagra, is fundamentally about removing friction from trying to innovate in finance. Often, banks and large asset managers feel the same pressures, ask themselves the same questions, but aren’t working on the same solutions. And while financial services firms have embraced the idea of consuming open-source code, she says, they are not as likely to contribute—and a one-way street won’t do anymore.

Deutsche Bank is another tier-one bank that has strapped in for the open-source ride, having just unveiled its contribution to Finos, called Waltz. Primarily developed by the bank and Khartec, the project helps large financial institutions comprehend their IT architecture in a consistent, well-documented, and digestible format. Waltz shows where applications reside, what they do, and how they’re connected. It has been used to assist with key performance metrics, data lineage, regulatory responses, as well as application rationalization and migration programs.

Russell Green, head of group architecture at Deutsche Bank, oversees thousands of applications and how they interact with one another. The IT landscape he’s responsible for is no green pasture.

“Hundreds of thousands of interactions. Different technologies. Different geopolitical distributions. Different people using them. Different functionalities. When you multiply that by the complexity of these kinds of architecture, and these big systems and organizations, how do you ask simple questions of such a complicated landscape?” Green says. “Who’s using which technology? Which system does risk management? Which one is deployed in this location? Which one’s out of date on this piece of software?”

Though enterprise architecture tools and management platforms are available, Green says none are truly viable for behemoth institutions such as Deutsche Bank and its peers. He also sees potential for open source to make inroads into the regulatory space. For instance, Waltz could potentially help firms comply with the General Data Protection Regulation and BCBS 239—the Basel Committee on Banking Supervision’s principles for risk data aggregation and risk reporting—if the bank can standardize its approach in the industry to the regulators.

“We can start to speak as more of a single voice on how to solve these regulatory asks from different bodies, which are sometimes very loose,” he says. “They have a principle, an idea, that they want us to be able to describe how our data gets from a system to a report, but it doesn’t tell you what you have to do. So if we can collaborate as a group of people and respond to regulators in an open environment, we can save ourselves a lot of time and, hopefully, a lot of pain.”

Counting the new contributions from Citi and Deutsche Bank, Finos platinum members—consisting mainly of major sell-side firms, with the exception of Symphony and GitHub—account for five of the past 14 open-source contributions to the foundation since early 2019, a significant increase. From mid-2018 to the end of 2019, 13.95% of projects were contributed by banks. For the comparable period of early 2019, that stat saw an increase of more than 20% of net new bank projects.

In addition to DataHub and Waltz, Goldman Sachs announced its Pure Alloy contribution for data modeling in November of last year, while JP Morgan has submitted two projects, Perspective for real-time data visualization and Cloud Service Certification for accelerating the development of a common set of controls and tests for cloud services.

Gabriele Columbro, Finos founder executive director, says a big goal for the foundation is to bring on more buy-side firms as foundation members and have them also contribute their own projects. From Goldman’s Alloy, some working groups with buy-side participants have spawned off, using the project for different data modeling endeavors. 

“Five years ago, open source was still seen something almost like an unidentified object,” Columbro says. “I think, for me, the main learning over the last three months has been: on one hand, open source has become an even more appealing vehicle to de-risk and neutralize the risk of especially large technology investments.”

For banks, ready or not, the clock is ticking.