Technology has certainly transformed our lives, but can you take it to the top? As Mick Jagger and Keith Richards penned in the sleeper ballad “Tops” from the Rolling Stones 1981 “Tattoo You” album, “… I’ll make you a star…I’ll be your partner, show you the steps, with me behind you, you’ll taste the sweet wine of success…” Well, if you work in Capital Markets, the sweet wine of P&L success today depends upon innovation, collaboration, efficiency, and government regulation. Innovation ideally adds compelling functionality. Collaboration can mitigate risk and enhance solutions. The two combined have the potential to increase efficiency. Then there’s government regulation, a complex nut to crack that certainly requires both innovation and collaboration for all to succeed.
In the electronic trading industry, innovation has lowered trading costs for the investing consumer; has made the markets more efficient and transparent; and has shifted real estate from exchange floors to fortressed data centers. Exchanges, data center providers, and electronic trading support firms collaborate to support the trading needs of large sellside banks, buyside asset managers & hedge funds, and new proprietary trading firms spun off from sellside banks in the first round of Dodd Frank reform. As the next wave of Dodd Frank reform implementation is upon us, specifically risk compliance, technology innovation will again play a key role in managing the P&L of all the firms on this food chain. The bottom line? Adding another layer of cost to the already razor thin margins that exist today, simply demands a solution!
A promising new technology that likely holds a piece of the long term solution for the trading P&L is Block Chain technology. A highly secure and encrypted database architecture that creates a distributed ledger, one set of records created at the beginning of the trade life cycle where all market participants have open access to the same copy, the Block Chain contains a high degree of trust, and can ultimately lead to more efficient and transparent same day settlement, and of course lower operational cost. The technology has the ability to process both trading settlement and loan transactions and there are implications for Big Data as well, solving the dilemma of “garbage in, garbage out”. Blythe Masters, CEO of Digital Assets Holding, whose firm has received a Series A $60 million investment led by JP Morgan, to develop this disruptive technology, maintains ‘These systems will tackle settlement latency in mainstream financial markets and will change the way our financial markets operate.’ Blythe Masters on Blockchain. See more on JP Morgan Blockchain testing.
Of course this is a huge undertaking, the transformation of multi asset class transaction settlement across a complex and fragmented global market, so it will not happen overnight. At the same time though, as the global capital markets’ P&L has gone through transformative change since the near collapse in 2008, financial institutions are under incredible pressure to improve margins. One way or the other, they will. Block chain could be one avenue to help achieve this goal. Interestingly, JP Morgan has been testing the technology over the past year and plans for live “applications” later in 2016. Stay tuned.
As a veteran analyst, passionate about financial analysis driving P&L growth, and always determined to increase operational efficiency in support of compelling analytics, this subject matter really speaks to my heart! In addition to the obvious operational “value add” Block Chain technology can add in transaction settlement, I see great potential for all of us who have labored over the years in calculating trading p&l’s and discerning key business trends.
Further, as a passionate Rock&Roll fan, I am completely delighted at the intersection with the music world, a subject I touched upon briefly in my September 2015 post “The Musical Artist P&L in Today’s Digital Streaming World”! A very strong potential use case for Block Chain technology is in the recorded music industry. Similar to Capital Markets, the Artist P&L has been transformed dramatically by technology in an evolving and fragmented digital market. Professional Music Advocacy groups, including the newly created Grammy Creator’s Alliance, have been out in force on Capitol Hill urging legislators to adopt new legislation and create mechanisms, using technology, to help Artists earn well deserved and transparent royalties for the music they create, in essence “to make a living”, and to promote and support an enduring legacy of musical creativity. Referencing the U.S. Copyright Office’s “Copyright and the Music Marketplace Report” released early in 2015, one of the recommendations reads “Encouraging the private sector to create a comprehensive database of music-rights ownership information with unique universal identifiers and messaging standards.”
On a lighter note, to round out the Technology to the Top discussion, how would you like to be on Jimmy Kimmel Live? You can be, using new video wall technology that Cisco has built exclusively for the show! Learn more here. Simply sign up at the website and hopefully you will receive an email from a very nice producer named Jamie. You will be sent a link to download the “Cisco Jabber” to schedule a live test with the production team, to make sure you have a solid internet connection. For wireless users, Verizon Fios works very well. Also, lighting is very important. You will then have a chat with the producer, so he can get a sense of your background. If the test is a go, you will then be placed on the priority list to appear on the show, when a particular subject pertinent to your background, is set to air. I am told you will then do a second test before appearing the following night. Very exciting and what a brilliant use of technology to engage the entertainment audience! Jimmy Kimmel Wall of America segment.
So to wrap up in signature concert footage style, I leave you with this incredible live 1993 Argentina performance, a technically brilliant & masterful combination of emotion filled voice & electric guitar by two Rock legends, amid a creative backdrop of carefully choreographed colors, lights, and video sequences. Enjoy!
