I might be overstating this, but tremors of a tectonic shift are beginning to ripple in the capital markets, stemming from the desktop application interoperability movement. If I’m right, the trader interface is going to radically change—and I know, I know, you’ve heard this before—but this time is different. The mechanisms of change, taken as a whole, represent a true revolution, even if the technologies are, themselves, old.

First, there’s this vast sea of data that’s growing every day—see: #alternativedata. Firms want to be able to easily tap into these datasets and experiment, then incorporate or fail fast. There’s also growing frustration over the cost and lock-in of traditional order and execution management systems. We’ve already witnessed a change here, as these traditionally siloed platforms are merging to form the proverbial OEMS.

Digging deeper, technology is democratizing in many ways. The widening adoption of public cloud providers—and the various big data and analytics libraries and services they provide, from Google BigQuery to Amazon Redshift to IBM Watson—is allowing users to affordably store and analyze exponentially more data—in some cases, from minutes to seconds. In an era of tightening margins, surging costs and the rise of passive investing, the hunt for alpha depends on the ability to harness data to create unique insights.

Tied to cloud adoption is the so-called “as-a-service” model, whether for software, platforms, infrastructures or whatever other term you’d like to bastardize with the “aaS” acronym. At the same time, Wall Street firms are embracing open-source tools, thus allowing for more collaboration and quicker time to market, and making these tools crucial components to the app interop movement.

To say the days of on-prem hardware are facing extinction would be, at this moment, a big overstatement, but there’s a sea of change underway for sure. So what does this all mean? After all, these are trends that both overlap and are distinct.

• READ MORE: In April, RBC and OpenFin allowed WatersTechnology to sit in on the planning session and standup calls for a two-week sprint to build out search functionality for Springboard, the application that allows the bank to launch its internal OMS, Salesbook. Click here to see how desktop app interoperability works in motion.

As I see it—and this is informed by people far more intelligent than me—underpinning all of this is the idea of desktop application interoperability, which uses containerization techniques to build a browser specific to the specific needs and wants of a financial institution. Firms like OpenFin, ChartIQ, and Glue42 are already working on solutions in this space, and it’s likely that more will look to enter or partner.

While mobile phones have figured out (to some degree) how to commercialize app interoperability, it’s been a tough nut to crack for the capital markets due to a lack of standardization and protocols, competitiveness, latency issues, and security concerns. Those barriers, though, are coming down.

This year is likely to see some major developments from true plug-and-play interoperability and increased participation from the major market data providers (see BOX: Five Milestones, below) to the spread of interop efforts in the consumer tech space and a critical mass of firms embracing industry standards (see BOX: Opening Up, bottom of page).

Below I list why I predict that this evolution in the market is going to prove massive and what needs to happen in the near future to make that prediction become a reality. If you think I have it totally wrong, though, I’d love to hear your thoughts. Shoot me an email: anthony.malakian@infopro-digital.com

Changing Empires

At this point, it’s important for me to say that I’m not predicting the deaths of the stalwart OEMS providers. Some will merge, some will be sold to a bank or asset manager, others will evolve their offering. But trading platform providers cannot ignore the change that is underway. Many have written about the death of the Bloomberg Terminal (the launch of Symphony comes to mind) and many were wrong. It is true, though, that trading platform providers—as well as analytics and data delivery vendors—need to get lighter and diversify the way they provide their services.

I’ve been covering capital markets technology for a little more than a decade. In that time, more impressive pieces of technology have come to the forefront—notably big data analytics platforms, quantum computing, and machine/deep learning. But the ability to allow different applications to communicate and interact with one another allows for freedom in the ability for firms to adjust and try new things with those aforementioned technologies.

Listen, I don’t want to sound like a sycophant here, but the Bloomberg Terminal, along with its ancillary services, is, as an ecosystem, a masterpiece of technology. There’s a reason for its lofty $20,000-plus price tag—a cost that many (more than 325,000 subscribers) are willing to pay. No one has been able to fully crack that nut, but many have tried and come, um, close? (Maybe relatively speaking, I guess?)

But even for Bloomberg, storm clouds are gathering. Michael Bloomberg is running for president, making a bid to win the Democratic nomination. Super Tuesday—when more than a dozen states/territories will hold their primaries—isn’t until March 3, so this conversation is premature, but the former New York City mayor has said that he will either sell his Bloomberg LP empire or put it into a trust should he become president.

Even for great technology companies, things can change fast. Remember when Thomson Reuters was going to overtake Bloomberg? Well, TR sold off its Financial & Risk business at the start of 2018 to a consortium led by Blackstone, and then—after being rebranded as Refinitiv—it was sold yet again to the London Stock Exchange Group (LSEG) in July 2019. No one knows what the future will hold for Refinitiv.

It should also be noted that a sale does not spell out d-e-a-t-h for the Terminal. But if Bloomberg LP is sold to, say, a company like Microsoft, the Intercontinental Exchange, BlackRock or Berkshire Hathaway, those companies that are paying $24,000 for a single Terminal subscription will have to assess their future relationship with the tech and data giant. It’s only natural.

Consider this: As WatersTechnology first reported in August and followed up on with a deep-dive investigation in November, Fidessa has seen its workforce slashed by more than 400 people—mostly through resignations—in the year following its acquisition by Ion Group.

Here are some things that actual Fidessa users told us, which can help highlight the precariousness of acquisitions:

• “The fact we lost a major layer of relations between the firms as a result of this attrition over the last six to 12 months—I think that has essentially caused this lack of transparency around releases.”
• “We’re lucky we implemented the software when we did. They’ve become a little bit slower to deliver on some of the things they promised. They have fewer people.”
• “I do expect those [contract] conversations to get a little ugly. Fidessa’s obviously a leading system on the Street, so there’s no question [Ion] will be looking to further monetize it.”

This is all to say that banks and asset managers are finicky. In the past, it was difficult to rip out and replace a trading platform. An OEMS is sticky—it connects to every aspect of an organization, and it can take two to three years to fully replace one of these systems. That’s why Ion bought Fidessa, LSEG bought Refinitiv, State Street bought Charles River, and SS&C bought Eze Software.

The mergers in this space are complicated because integrating the various systems—from trade execution to risk management to analytics platforms to charting software to compliance and reporting workflows to customer relationship management systems—is… complicated. But what if technological advancements, along with new standards and protocols, help to make interoperability easier? What if the traditional OMS and EMS model—the model of the last 20-30 years—is dying?

Story continues after BOX

Adapt, Improvise, Overcome

The ability for banks and large asset managers to change has, to put it mildly, traditionally not been great. Capital markets firms were slow to embrace the cloud, they lag behind consumer companies when it comes to the adoption of machine learning, and they’re still trying to get their heads around alternative data.

This is why banks and asset managers are embracing many of these desktop app interoperability efforts—they want greater flexibility, they want to avoid vendor lock-in, and they want to experiment with new tools and datasets in an easier, more cost-efficient manner.

In 2019, OpenFin, which founded the FDC3 initiative, closed out its Series C round of funding, raising $22 million. The round was led by Wells Fargo, and also included Barclays, JP Morgan, HSBC, Bain Capital Ventures, and Pivot Investment Partners.

At the start of 2019, ChartIQ, which oversees Finsemble, its desktop integration platform, raised $17.4 million in a Series B round of funding, led by German private equity firm Digital+ Partners, and it counts ValueStream Ventures, Social Leverage, Tribeca Angels, and Illuminate Financial as backers.

And while not a desktop app interop provider, the Fintech Open Source Foundation (Finos) has played a major role in the trend’s development, as a nonprofit organization that contributes to FDC3 and looks to help financial services firms adopt open source software, standards, and best practices. Members include Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, RBC, UBS, as well as OpenFin, ChartIQ, and Glue42.

Again, it’s important to reiterate that it’s still early days and there’s a long way to go. But if 2020 can see some of the major data and OEMS providers get involved, if more banks buy into the FDC3 standard, and if the banks start putting some pressure on their brokers and vendors, a tipping point could come sooner than even the most ardent proponents might expect.