Status Quos Are Made To Be Broken

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By Patrick McCullough, Speakerbus President & CEO
When the respected thinker and science fiction writer Ray A. Davis said, “Status quos are made to be broken,” he could very well have been thinking about the mass of legacy technology still being used by banks and brokers in the major financial centers. One of the main tech-stacks which is years – or possibly even decades – overdue for change is voice technology in trading rooms, but it seems that status quos here have stubbornly survived well past their sell-by date. In a trading environment where some of the brightest talent use the most advanced applications to out-smart and out-pace the competition, why do they still have to rely on proprietary (read closed and expensive) voice technology in 2016?
A recent Gartner list of strategic technology trends for 2016 predicted that this is set to change. Gartner anticipates that: “The emphasis will move from discrete mobile devices to mobile people, surrounded by a shifting array of devices connected to each other and to cloud services. Enterprise architects and IT leaders must secure, manage and exploit this device mesh to drive digital business strategies.”
Mobile people rather than mobile devices will transform the technology of the trading room and will have the potential to move trader voice into the 21st century at the flick of a switch. But the change will be neither iterative, nor an evolution of the current proprietary offerings. The foundation for the new trader voice will be cloud-hosted, with standards-based hardware and open software, designed from the outset to be compatible with applications and services from multiple vendors. The change will embrace SaaS, the cloud, ever-evolving voice compliance requirements, along with strategic partnerships and alliances in order to deliver what the user wants rather than what the vendor wants to sell.
Trader voice at the moment is in a place which is not unfamiliar: we have seen this in other parts of bank technology stacks. Initially, there is reluctance and resistance to new technology and a new approach, which is followed by early adopters, and then suddenly there’s a sea-change, with everyone changing their infrastructure, almost overnight. While it would be interesting to think we are approaching the change point in trader voice and I do expect to see some significant changes in the next twelve to eighteen months, I think the market will prioritize caution when making changes to such a core part of the tech stack. This will not be a “rip and replace” exercise because the prospect of such major change and a short timeline would be daunting. This is the reason why technology providers have developed products that will initially enable innovative solutions to co-exist with legacy systems, allowing banks to take this necessary change in an easy, low-risk and inexpensive way.
The upcoming changes in trader voice are being driven by two significant issues. The first is the closed architecture of the old technology, which is very quickly becoming an anomaly and an obstruction to creating a unified communications infrastructure in financial institutions. The second is the cost of ownership and support of legacy tech, which is becoming hard to justify. So why are trading rooms still clinging to their old technology? Well, there is clearly value in the ‘tried and tested’ and the dependability of dedicated lines and robust hardware is reassuring. But this comes at a cost, and I think that it will be the cost of legacy systems that is the real driver for change: it is becoming just too financially painful not to look at new methods of voice trading. Aside from reduced costs, there are other very good reasons to embrace change, of course: new, open systems can help institutions deal with the constantly-changing compliance requirements as they allow trade reconstruction and voice pattern analysis, amongst other benefits. This is of real value to institutions, as are improved risk management and a fully-integrated communication infrastructure.
I won’t conclude this commentary by resorting to irritating phrases such as game-changer, tipping-point, paradigm shift, etc. What I will say, is that there is a time to break the status quo, and once that time comes, the change will come quickly and will be driven by cost savings and the need for openness.
I feel it appropriate to close with another Ray A. Davis quote, which sums up this situation: “A challenge only becomes an obstacle when you bow to it.”
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