Broadridge Consulting Services
David Smith, capital markets practice lead at Broadridge Consulting Services, talks to Jenna Lomax about Broadridge’s continuing goal to help clients reduce the complexity in their technology stacks
How is Broadridge approaching the current capital market landscape, bearing in mind the increase in trading volumes, combined with the backdrop of the COVID-19 pandemic?
We had very little disruption in handling the elevated volumes that occurred at the start of the COVID-19 pandemic. The limited disruptions our clients experienced during the spikes in volatility greatly increased their confidence in our platforms’ resiliency and led more to select Broadridge as a technology partner.
Those clients who had their own operational disruptions due to the pandemic were able to rely on Broadridge to provide the additional resources they needed to maintain key business functions.
How has Broadridge applied its consultancy and technology solutions to guide its clients through the past two years of global volatility?
COVID-19 accelerated digital transformation to unlock actionable insights from data and inform decision making. Our clients are focusing on digitalising workflows, improving client experiences, and refining data intelligence analytics.
We talked to our clients about core themes such as the digitalisation of assets and workflows and the benefits of service mutualisation — especially around the ever-changing backdrop of regulatory compliance, along with the democratisation of those services. All of those key themes are currently happening within the capital markets space and are much more front-of-mind now than pre-pandemic.
In the capital markets consulting space, we are currently focused on helping our clients navigate the transition of moving to a shortened settlement cycle as a way to help alleviate volatility risk. We are asking clients to think about their business model and what they want to be doing over the next two to five years. With that view in mind, we are then able to help them on the right path from a technology and operational perspective.
Right now, and generally speaking, many industry systems are still very fragmented. Even though we hear a lot about straight-through processing (STP) and automation, there is still a lot of room for improvement required to move to a true state of STP.
Asset servicing is a great example of where processes are not really centralised or consolidated; there is more room for efficiency. Many clients are still experiencing problems with their existing infrastructures, and are turning to Broadridge, asking: “What can we do better?” They are asking about our next generation solutions and what we can offer them now to improve their automation and operational efficiency going forward.
Do you think operational innovation will be the main industry talking point of 2022?
Yes, operational innovation will be a major theme in 2022. Overall technology modernisation and front-to-back simplification will be the main talking point: How can the industry achieve greater operational efficiencies while reducing costs?
As we know, shortening the settlement cycle to T+1 has been announced in the US, as well as in Canada, to be in place by the first half of 2024. As of now, Europe will still maintain a T+2 model but I cannot imagine an announcement to move Europe to T+1 will be far away, especially as cross-border transactions, along with foreign exchange implications, will make those types of transactions more complex due to different settlement windows.
We have talked to clients at length about this. From the first half of 2021, broadly speaking, we were not having many conversations about it with clients. But in the last few months, we have been inundated with calls — clients are now really starting to initialise their plans toward the move.
They are asking us what they need to do and are interested to know what impacts the move to T+1 could have on their business lines. Conversations about T+1 will only increase as it is a mandatory industry change that requires a great deal of effort to achieve.
I would say the preparations needed for T+1 need to be made by June 2022, so market participants can allow enough time to not only become T+1 compliant, but also identify additional opportunities to streamline their processing.
What other areas do you think will be heavily discussed or assessed this year and beyond, particularly with capital markets in mind?
Technology is going to be the big driver. Many organisations still rely heavily on batch processing — especially large institutional firms. The real change and evolution that we expect to see in the future is mainly the move from batch processing to either intraday, near real-time or to real-time; the ultimate goal ahead is to achieve real-time.
The path from batch to real-time is going to be interesting. The industry may continue with a batch or make batches more event-driven — where an application programming interface can bring in the relative data you need to know — or we could see an intraday batch system with more frequent intervals. Those are the factors that are now starting to formalise and be considered.
Another area that has been overlooked in shortening the settlement cycle is the impact on an organisation’s treasury management — understanding your cash flow, understanding your funding requirements, how much cash you need to raise and from where. The time to forecast is being condensed for such a critical function.
Typically, today under a T+2 marketplace, you have almost another day to figure all that out. With T+1, that time shrinks down to just hours. That factor could be problematic when considering T+1. So that is why it is a very important focus point — to understand how that process is going to really affect the organisation. That is just one detail of the overall impacts, but it is the most important factor for running the entire firm’s business.
What has Broadridge’s capital markets team got planned for the year ahead?
Our product teams will focus on ensuring our current suite and next generation products will be T+1 compliant. We are looking to develop new solutions based on the feedback received from our clients.
In addition, last year Broadridge acquired Itiviti, a provider of principal and agency trading solutions and manager of the NYFIX network, for US$2.5 billion, our largest acquisition to date.
We are focused on integrating Itiviti into Broadridge so we can help our clients accelerate trade lifecycle simplification, which will be critical in achieving T+1 compliance.
We are also focused on continuing our goal to help clients reduce complexity in their technology stack to increase their agility and lower their total cost of ownership and risk.
We are developing componentised solutions to enable our clients to modernise and rationalise their technology spend, and will continue to work with clients to expand the suite of next generation solutions we offer.
