The way technology will revolutionize finance was part of every conversation at SIFMA’s 2018 Annual Meeting in Washington, DC.

The securities industry continues to explore new solutions within their own firms, through partnerships with fintech firms and by sharing information with regulators. Our Annual Meeting discussions also focused on our commitment to serving clients and managing risk to ensure safe and sound capital markets.

Identifying an optimal operating model

The value of innovation is widely viewed as a way to drive more efficiencies and lower costs – allowing firms to reshape market structure, reinvent employee tasks, and redefine how they interact with their clients.

Bank of America’s Chief Operations and Technology Officer, Cathy Bessant, told delegates of the potential of technologies such as distributed ledger technology (DLT) and artificial intelligence (AI), which can fuel a tremendous amount of growth in financial services when applied thoughtfully and responsibly. As firms increasingly use AI to support repetitive tasks and compliance reporting – freeing up human capacity in those areas – Bessant asserts that technology won’t necessarily be replacing employees in the future. Rather it will prompt firms to reskill their workforce, so they can focus on developing their offerings and client interaction.

“We, as a firm, don’t believe technology is the destination; we believe that our clients are, and we use technology to help us serve them” – @CathyBessant @BankofAmerica adds that the power of #AI is decision-making at scale #CapitalMarkets pic.twitter.com/JF9O0wB4f0

— SIFMA (@SIFMA) October 2, 2018

Market participants on the Fixed Income panel described how electronic trading and workflow automation have decreased risk and improved transparency, providing more opportunity for the buyer and seller. However, Glenn Taitz, Invesco’s global head of fixed income trading, said that we have barely “scratched the surface on the use of technology within electronic trading.”

According to Kristin Maher, managing director and head of fixed income services at Wells Fargo Advisors, it’s time to find the optimal operating model to solve the biggest challenges. Some of these challenges in the fixed income markets include the handling of larger trades electronically and trades with an absence of data. Maher explained that automation currently works well in the quoted markets and for frequently traded securities.

Engaging early with regulators to understand new risks

During the Fintech session, Comptroller of the Currency’s Chief Innovation Officer, Beth Knickerbocker, shared that she is open to learning about new technologies and working alongside firms, viewing this collaboration as an opportunity to follow their discovery and discuss how existing rules may apply. Daniel Gorfine, the CFTC’s Chief Innovation Officer and Director of LabCFTC, added that it is important for regulators to understand tech development, so they can identify and flag new risks.

Although a sandbox can be one way for firms and regulators to have that discussion – providing a forum in which to experiment and receive feedback – there is still the challenge faced by firms of integrating new technology with existing systems and its impact, if any, on the broader market ecosystem including the potential for unintended consequences. When asked about a regulatory approach to fintech, regulators agree that the industry should continue to innovate, but just as importantly: agencies must reach a consensus on fintech oversight, especially if new rules may be needed.

Protecting customer data and cybersecurity a top priority

Just as emerging technology represents potential new opportunities and greater access to data, it also represents risk. There will always be change and next-generation processes, and it is critical to work together on common principles and standards to protect our clients and their data such as through SIFMA’s Data Aggregation Principles and the industry’s cybersecurity resources and best practices. As a global industry, all market participants are interconnected and part of the same ecosystem and need to work together to protect the sector as a whole.

While the pace of change in the industry is difficult to fathom in itself, “finding talent to stay ahead of emerging risks is a big challenge,” said Cathy Bessant. “By the year 2020, there’ll be more cyber jobs than there will be talent to fill them” and there must be a mandate to address this gap.

.@giancarloCFTC told The #CapitalMarkets Conf that #cybersecurity is job #1 for the @CFTC. It's a top priority for #finserv, too. Learn more here: https://t.co/QLH8wQeBhe pic.twitter.com/KLPEqJvfsd

— SIFMA (@SIFMA) October 1, 2018

As Charles Schwab’s Lisa Kidd Hunt said in a discussion on SIFMA’s initiatives and priorities, technology is opening up advice and investing opportunities to millions of Americans that previously haven’t had access to them. Regardless of the technology used or how it is implemented, Bank of America’s Cathy Bessant reminded Annual Meeting delegates that the stakes are high and the key to adopting emerging technology is “rigid and relentless governance”.

For more on these issues, register today to join us at the 2019 Operations Conference & Exhibition: May 6-9 in Boca Raton, Florida and refer to these resources for information on SIFMA’s position regarding emerging technology:

• Promoting Innovation in Financial Services (April 2018)
• SIFMA Fintech Regulatory Sandbox Proposal (May 2018)
• Cybersecurity in the Financial Sector – Industry Concerns and Activities (April 2017)

Tom Price is Managing Director of Operations, Technology and BCP at SIFMA.

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