David K Donovan Fidelity SEC - Radical Changes in Financial Services

According to David K Donovan  Jr  SEC financial institutions are in a state of radical change and have not gone through this type of transformation to their business models since inception of their business. Some of the issues that financial institutions are facing today:
-  European and U.S. regulators still have to come together and agree on the right set of rules to govern the trading of over-the-counter  (OTC) derivatives.
   -  ( ETD) Exchange traded markets need to examine high frequency trading ( HFT ) and decide whether to vote on additional regulatory and legislative governance.
  -   Data management is becoming one of the most important initiatives to financial institutions commercial success. All parties in the capital markets life cycle are demanding greater transparency into financial and operating risk models and procedures.
  - Most firms will not slash budgets but will get more out of existing budgets by lowering the total cost of ownership or TCO.
 -  Every firm will look to lower TCO by outsourcing commoditized operations and processes. Banks will look to identify within their infrastructure what components or businesses can be outsourced to a shared model possibly leveraging competitors infrastructure. The self analysis will also focus on what part of their infrastructure is proprietary to their business and keep this in house.
-  Banks will look to become more nimble so they can better manage ongoing change to their business. A couple examples of the future state activities would be ;
         -  Electronic trading moving to new asset classes and regions
         -  Broker dealers wanting as many low latency connections to as many execution venue’s as possible while minimizing hardware and operational costs.
-  The most common initiative across most banks is the need to invest in data management infrastructure. Having a more efficient data management operation is being driven by the need for increasing operational risk management and regulatory compliance.David K Donovan Jr Sec
-  The European debt crisis has led to many changes within the banking industry. Central banks regulators are mandating frequent , efficient and granular transaction reporting. The new central clearing and OTC derivatives market structure will put increasing rise in demand for new sources of cleansed data.
-  Data will also play a factor in performance attribution and Alpha creation. Pension funds will target more of their annual contributions to hedge funds as a greater source of investment in hope of making up the gap between benefits owed to pension participants vs. the total of pension contributions and returns on existing assets.

-  The key to hedge funds generating Alpha is their ability to take large sets of disparate data and finding investment opportunity. Part of this strategy includes speed and latency measurement. Hedge funds have and edge when they can crunch data faster which leads to identifying trading opportunities faster than their competitors. David K Donovan Jr SEC

Conclusion 
In summery broker dealers need to deliver differentiated services at a lower TCO. Asset managers are looking for unique and creative forms of Alpha generation while managing operational risk. Financial firms regardless of strategy will need to have an operating model and infrastructure that can be agile and react to continuous and unexpected change.Re thinking your data infrastructure is a critical part of your success. David K Donovan Jr SEC

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