Six typical reasons why trading firms embark on an operating model review

Conducting an operating model review helps to enable simplification and compression of asset class trading functions and technology operating processes. Below are six typical reasons why trading firms embark on an operating model review:

  1. Cost Reduction: due to higher trading and investment operating costs and lower revenues, firms would use a roadmap strategy to review, simplify and reduce the high costs of cross-asset front to back operating models (such as technology, personnel, etc.) as well as moving to a variable or on-demand cost model measured by productivity. A review process is focused on cost reduction and efficiency.
  2. Creating a data-driven business case: A review process provides a current state initial risk assessment, with risk severity, probability, and impact measurements. Providing clear problem statement and business case to give a fundamental justification for investment in change.
  3. Empowering new opportunities: Gain access to new technologies and service providers to accelerate change to remain viable, sustainable and maximise your commercial opportunity.
  4. Firms are in the same boat: They all want increased efficiency with lower cost and look to transformation to provide a path to the future. Additionally, many firms look externally for third party solutions or better market infrastructure.
  5. The outcome of many operating reviews leads to outsourcing: Firms are choosing to outsource services such as trading, data, investment accounting and post trade services, and gain access to best of breed expertise, scale, and sustainability.
  6. Firms are looking to make their infrastructure into a profit centre: Most firms are now reviewing how to offer services externally to further monetise their existing platforms and cross-sell their capabilities or solutions.

Investment firms have seen both disruption and opportunity in the past decade. Accelerated roadmaps, new technological breakthroughs, rapid market volatility, reshaped strategies, new regulatory requirements,  geopolitical conflicts, pandemics, and environmental,  social and corporate governance are some of the drivers continuously impacting business as usual today.

Prodktr have recently completed a cross asset trading operating model review for a global asset manager including reviewing outsourcing options. As the asset management trading industry becomes more big scale, data driven, firms are looking for the capital markets change boutique to help them simplify and achieve operational efficiency.

For more information please see our white paper A Risk Based Approach to Upgrading Your Trading Operating Model – a detailed insight into maintaining the competitiveness of your business.