Capital Markets Service Delivery - You Can’t Fake It

With a leaner foundation of automated execution capabilities, winning broker dealers have channeled their human capital into experts that can listen, and deliver results through iterative process improvement.

Greenwich Research recently published a report focused on the changing role of the broker dealer, and in particular that of the sales trader. It’s a useful look inside the dynamics of an industry that has seen dramatic changes in the form of lower margin and customer spend, further compounded by an abundance of competition steadily eliminating differentiators over time. It’s an all too familiar scenario, borne of the same technology-fuelled winds of ‘creative destruction’ that continue to disrupt so much of the economy.

Nevertheless, there’s more than a silver lining here - there’s a blueprint for success in the face of this change, and that’s service delivery. In this context, service delivery comes in the form of what GR calls “execution consultancy.” The execution consultant sits astride the multiple formerly silo’d channels of execution and analytical services to marshal the right resource for the customer’s unique requirements.

With a leaner foundation of automated execution capabilities, winning broker dealers have channeled their human capital into experts that can listen, and deliver results through iterative process improvement. It is a significant shift and investment - these consultants can only be effective with data - but equipped with the right tools, they can measure performance across strategies over time and better understand how to deliver more effective trading performance, and reduce the overall cost of execution.

The parallels here on the technology side of the business are remarkable. Where once a smooth-talking, back-slapping sales rep could make a good living slinging servers, switches and software, the ranks of that persona has steadily dwindled in line with the commissions they once earned. This is putting new pressure on the larger product-oriented vendors who had long relied on the ability to fill a hungry sales person’s bag with product literature and count on them to achieve quota. The same information asymmetry that enabled wide bid ask spreads in the markets for decades enabled a technology buying relationship that was prone to suboptimal product selections at best and under the table graft at worst. Alignment? Hardly.

The common dialogue we see with the capital markets enterprise today is focused at a service delivery level, and it requires a far higher level of domain expertise and mature thinking. As buyers have learned to leverage the sea of data available online to better understand choices, prices and experience from peers, their expectations have risen in kind. Customer-facing staff need to be prepared to have a conversation less about what and how much, and more focused on how the business needs to operate and why the solution in mind is an appropriate fit.

The challenge is retooling the organization. Just as the execution consultant requires a different mindset and set of skills than the sales trader of the past, the modern technology service provider must present themselves through experienced practitioners who understand how to properly design infrastructure for the workloads and business needs at hand, navigating the choices between physical and virtual deployments, between private and multi-tenant environments, between architectures at the opposite extremes of security and high performance.

What should the model organization look like? Above all else, flat and informed. Customers can no longer tolerate the friction caused by silos made in the image of middle management’s shortcomings. Instead teams need to be self-organizing around the customer issue with a culture that places issue resolution above all else. And critically, that demands an information platform that puts each member of a team in a position where they can be effective. Whereas the sales trader needs a deep well of execution quality data, the technology service organization needs a combination of workflow and self-discovery tools to make issue diagnosis and state discovery on every element of the platform a snap.

It sounds straightforward. It’s even easy to talk a good game about your abundance of these tools and cultural elements but complex projects simply can’t be delivered effectively without this solid foundation. In truth, it’s impossible to fake it.


Ken Barnes, Options SVP Corporate Development

About Options ( Options is the leading provider of cloud-enabled managed services to the global capital markets. Founded in 1993, the company began life as a hedge fund technology services provider. More than a decade ago, the company made a strategic decision to become the first provider to offer cloud services to the financial sector. Today over 250 firms globally leverage the Options platform, including the leading global investment banks, hedge funds, funds of funds, proprietary trading firms, market makers, broker/dealers, private equity houses and exchanges.