When you are immersed in an industry it’s sometimes difficult to see how it’s really changing. Global financial markets are a good example of this as the populist headlines can easily miss the subtlety of what is really going on. The polemic against misbehaviour by some market participants is obviously deserved (estimates of the total in fines and related costs are approaching USD 300 billion) and, of course, no conversation about the industry is complete without mention of the ‘R’ word. It’s easy, then, to fall into the trap of believing that we face the rest of our working lives chained to an ever-growing compliance burden.
Against this, however, is the simple fact that global creation and consumption of financial instruments is going up. But what is changing is how they are consumed and who gets to participate in the food chain. Making money out of market opacity will be out, as will simply getting between customers and sources of liquidity. In its place is an exciting world where Gen Y traders will combine structured and unstructured data to provide genuine (and real-time) expertise. And this will all need to be done in a way that is secure, audited and error-free. New business models will emerge, too, in terms of how participants are brought together. Fixed income, for example, is on an inevitable journey towards being electronically traded as the cost of warehousing risk continues to rise. The question is, which venues will be successful and when?
I guess the point I am trying to make is that the firms that will succeed are those that embrace these changes and are excited by them, rather than trying to hold back the tide.
Exciting times ahead, then.