In the Age of Financial Regulation

Jeffrey Hurley

Information Technology

Two Cow Economics

“Financial institutions have traditionally relied on very old architectures of systems, processes, and technology; they made few changes until the financial crisis forced regulatory reform upon them” ~ Sriram Venkataraman, Executive Director, Financial services Risk Management practice Ernst & Young

IT Budgets

• 70% on Compliance• 20% on Operational

Effectiveness• 10% on Innovation

Power to the User

• Mobility• Wearable• Gestural Computing• Channel Innovation• Intelligent Assistants• Fragmentation

“If you have had a negative experience it is much harder to get over than if you have had no experience” ~ anonymous

• Ethos (Credibility), or ethical appeal, means convincing by the character. We tend to believe people whom we respect.

• Pathos (Emotional) means persuading by appealing to the emotions.

• Logos (Logical) means persuading by giving reasons.

Source: http://courses.durhamtech.edu/perkins/aris.html

Cable Box

• Remote start• Troubleshoot• Reboot• Then you come to the store or

tech comes to you

Innovation Exists To:

• Compete in incomplete markets• Address agency concerns & information

asymmetries• Minimize search, transaction, or marketing

costs• Response to taxes & Regulation• Globalization & Risk• Technology shocks

IT Model Change

• Device Agnostic• Set up own ID’s set up own

applications• Self-enroll• Self provision

Response to Regulation

• Trade Different Markets• Trade Different Product Mix• Exit businesses• Push automation and

collaboration

IT Infrastructure is your Caissons

• Virtualization• Cloud•Mobile• Social/Crowd Sourcing

Innovation

• IBOR: Investment Book of Record

• HPC: High Performance Computing

• ALGO: Algorithmic Trading

• Data: Big Data Analytics

IBOR

• Data Aggregation• Processing Capacity• Start of Day, Intra-Day, EOD• 3 flavors: ABOR, Excel, OMS

HPC

• Grids, clusters, MPPS, Multi-core processors, Accelerators, Parallel Computing• Pricing, Portfolio Management,

Risk management• High Frequency Trading

Algorithmic

• Smart trading• Complex event processing• Trading signals

Big Data

• Scale-out Storage• Convergence of data sources• Innovative applications• Re-modeling: better, faster, less

risk• Cloud storage

Issues to Consider

• Core purpose• True value add• Underlying assumptions• Timing (Market Cycle & Stress

Testing)• Revolutionary or adaptive

“Innovate or Die, Collaborate or Die Alone”

~ Kirstine Stewart, MD Twitter Canada

Photo Credits• Scale Model: Michel Ngilen https://www.flickr.com/photos/20179579@N00/1532591375/in/photolist-3kqW2e-3kvmZy-3kqZJX-3kqYDD-g12RgX-

notPJM-nfwfDx-agoMFC-agoLUG-agoMGC-ehXgTt-9N72ZH-9N72aT-awCyjH-5eNiHk-5eSGEY-9N9Mh9-9N73T8-9N73kH-9N9PKo-agoLQQ-agm2jP-agm2mH-agoLVU-agoLSL-acSag1-b7dvmp-6q1nWf-dWtdTK-n6o2N1-nhZner-aF22P5-9N9zHW-9N9yXw-JpYZY-aEXcZk-aEXcqt-5vcVkv-Jq4bx-JpZ2f-aF23o3-cd8BNG-frasCa-fraswM-frpLvo-2ezvh-frpLjL-frpLqf-awCtkX-awFhkN

• Cable Box: David Precious https://www.flickr.com/photos/bigpresh/3860586022/in/photolist-6T9vHY-4UtUR6-9hjF6F-k5TXLz-8BuXtX-XUVDs-ddkaNv-56Rg9z-7Nvvf1-m6pKxQ-oGhEi-52fhd8-77GMba-oGhzo-oGhoL-ddk29w-9hjF1K-5wyxmc-8GCkT1-6kkpmq-5XFCA2-9g4mzv-34gq73-5q8WAu-5gqG64-74Kuih-8SLdiA-8SLdZ9-8SH8qi-m6oEvP-ksQ23-dKfdXg-6K2deG-8SGr4N-8wZn9t-8SDscT-8SDuh6-8SDtbv-8SGnZw-8SGj9G-8SGmNw-8SGkuy-8SDpF2-8SGvr7-8SDjP4-38qVwc-76za37-g4S3kX-kMvbw-cPZHXA

• Power user: Chris Harrison https://www.flickr.com/photos/cdharrison/280252512/in/photolist-avLhMr-5Vg9dD-5SHtUU-bDMn4-5RfMF5-6aQivJ-662uAY-6sdZDR-6Vbwqe-7Cg4kM-adyc5E-8TJzKy-xcE8k-qLniS-3xaF7f-9zAePZ-aycSBW-61RweK-6nJeRs-df7N3P-feno6C-b6QFZD-NdAUQ-2UGyU5-8Miw2N-AKC4i-6YEnrs-5Y15bt-3rbY1s-kfBhwV-5UxTPV-dQEWmS-5a5d3b-2DGHqc-8pkddU-7ARCUQ-6ADv4f-RURck-9QZyJd-6DHPJM-6GccJP-6DHFM8-6Gc7op-6DMUtw-6DMR5m-6DYy5o-6QGovd-6DHLuB-6DUFSH-Go8Zy

• Garden of Healing Hartwig HKD https://www.flickr.com/photos/h-k-d/6796594113/in/photolist-iH98pX-cc59Sw-6hvXDX-4GZUZ9-bmAjD8-6LZjkR-agEJLt-eSmRdt-6Mng6S-6NiMzu-apoD6F-4J6B3S-7kw7Cq-7ZuzjY-bpyR6H-JQBap-53kkoc-ms1GZV-eAkay3-5tFwKC-8YY5tX-7BmXD6-eUDZrM-85wsE-2QEskf-4YDMZ2-2QA6qZ-kUx3vF-8vCCY-7tN7bg-5KWLqZ-9hqkuL-2QzVLr-2QzS94-6KosGR-eHeiHt-8gQU1J-2QEzbQ-2Qze6V-eBqBbf-5kGUvP-gQLrXP-5jhfU6-4Krva2-7KeF1y-6Kpc5g-2QzQAr-7JBRJj-mqsEm-7yf88a

• Innovation Boegh https://www.flickr.com/photos/boegh/6085347780/in/photolist-agJZTj-fEKA4t-6RatpM-bHVP3-4qCseG-5XRNJC-fpmM79-kMbom-33BVoG-7Efwam-8S83NL-97apYs-7KbCQT-7zpr87-8z476d-c2iCA-7pqdLo-arwdEA-99UsVX-eeigiy-9AsTM3-9Twsrz-CWBqU-hJwAag-9uU28Q-daGT9K-8eKnR1-8VBTUM-8mw7NB-e4yvdi-cudfLE-cudfXE-8myAUB-8mxvo6-cudbEo-7J6seb-fuTARc-cudc7Q-cucXJj-cud4Tb-cudfiY-cud5cj-cud97C-fuTzAT-5115Ja-7ro3Qa-4YBH5i-iqQxdt-cudes3-cuddz9

• Budget 401(K) 2012 https://www.flickr.com/photos/68751915@N05/6757849129/in/photolist-biaK7a-aW9L3P-8BUZCM-aW9L9V-9AFkL-8c4CCx-5xZoGH-ahtNwe-ff4oe9-91EfCA-91EhAy-91B4JP-91B6Se-91B79t-91BacH-91EgkS-91EhUw-91Edv7-91Bd7z-gG9BmS-8d1zHm-aqGqKb-g6irsf-gG9tYp-6ZBV3R-7FyjMW-8cXfKr-8cXcN8-8d1wZj-bKkiq-69mwjg-69qGCJ-gGahjZ-dNFVNP-dNFULD-dNFTZz-7zEj5Y-bkPYcm-g6j2ZD-g6j3ki-g6j2JD-g6ir1d-g6iqvL-4wmv8x-bbmUgr-7djPxU-cMXNXh-dySicC-2qFZPX-gG9cL3

• Regulation James Cridland https://www.flickr.com/photos/jamescridland/410037553/in/photolist-bLJ2oP-ahYrsd-CexSZ-ahYrJA-814D7N-dmtLTK-eazgCY-dv9DfT-5ioV3k-87BVkG-9TiRCS-eatCkD-aYKTvK-8roJkX-dG3MeK-ahVhaR-8kDFVU-eeoqAw-7WWMbX-6fdSAP-aYKQUK-mcccZi-4AVToj-aYKQfc-eZqadM-i3ze22-f3nupH-fye9Zg-9nBqhg-7Akuhh-9vKYT5-9o8hk-bdgePz-3VjiS-fKuqVu-aGk9ng-8vPi26-8vSjQq-87yLmi-6UPkBV-4zBrDo-5xbQwi-fvFyaZ-6vSDWh-ec3kYv-57c6iP-ec9cQY-ec3cj2-5bEJfF-5ddKAd

• Foundation: https://www.flickr.com/photos/nypl/3524537942/in/photolist-an2YWA-6nsbqE-6nsbky-7cpLnE-ax9iCT-7DbA1Z-bzN1zX-4WmyXh-7DfoHY-7DbARB-7DbAMk-7DbAQg-7Dfobj-7Dfo8w-7DfnCw-7Dfoh1-7DbA9M-7DfoiY-7Dfopm-7DbzSB-7VBD5P-4VAQ7W-4i79F4-4i7844-dWrYgE-aBNM31-677ueX-faKvzK-kKG2Sw-7DfnH1-fbeMaD-7zXyRV-7A2k25-7zXyUP-7A2k4q-7zXyW6-7zXyLB-7zXwxB-7zXyT8-7zXyQc-7zXz2X-7A2jRQ-7DbAGM-9dNQog-9grNT5-9grNGS-7Dfo1W-7DbABn-7Dfos9-7DbAt8

• Investment: https://www.flickr.com/photos/lendingmemo/11697209523/in/photolist-iPDfSg-4KN9xj-eL9mU6-pFvMp-aDv3Y6-iPCSE1-8S69uS-9WyPHD-cyKZpm-8usD9K-hs9oDJ-9EY7yT-bxt7f6-aqUcsS-dmyfCP-gC1WRU-gYUZuK-a6BYfY-fH31gL-fGKqfH-fGKq5v-7AEi3R-aqRwAZ-aqUcC5-dJWvXx-aqRwQc-eHeiHt-iNFkZT-bvKzfd-bvKzm7-bvKziy-cRmgcb-bJEmEz-ao6aKN-ao3n1X-ao69jY-bvKyGh-ao3nrR-bvKyAY-fH2ZZA-fGKqk8-8p7ZHV-fH2ZUu-fH2ZS7-fGKqYi-fGKqUx-fH317S-fGKq8v-fH314E-fH31bh

• High Performance Computing: https://www.flickr.com/photos/inl/6236052094/in/photolist-78uqjf-78qnTB-78qmNZ-78qeRt-gMhxBb-dTe69a-kx2bAc-kx18sx-kx18xH-fKRf7x-78qrie-78uegs-78qcGT-78qvoD-78ugch-78qwji-78qrLa-78uioC-78ucwE-78uexW-78qkd6-78ursb-78ujgU-78qmaK-78unDU-78qw1M-78uaeJ-78qsH2-78uhpS-78ufNG-78ujwQ-78uuUQ-78qg1X-78qhoz-78ubPS-78u94w-78qq4K-78u75Y-78usMb-78uax5-78qmuR-78uhKY-78qvKe-78u9Zu-78uufY-68Gryu-8KiEvY-av4p2y-kx18iz-kx3cW7

• Math; https://www.flickr.com/photos/t_e_brown/8677750589/in/photolist-edPJVt-fvuwdn-bkaSvN-48phJY-fCYCVe-8qnJKb-6XpxG1-jGD71V-7DyiHQ-cEbgUS-bighsV-48phGj-av3Lyc-2LTAn-3p8yA3-6QGtFT-edfAro-9ScXj8-axNyFm-aP2eg6-7zc17f-7zGULq-w3NB8-dodBaC-dSSPEd-jJNumg-bnAhyV-tDQ1e-5Z5WcD-48kfYe-48phrW-5Zag6J-aGhYRT-eDVquR-9XVPm8-aF2sq9-62koQD-8pJyin-by5Lfk-8pMJmY-bnAhxV-7ADLcR-8pMJs1-8pJysa-yU1uX-5tzWnC-42CaQA-crzcdm-48kfi8-48kfWr

• Money bags and bars: https://www.flickr.com/photos/library_of_virginia/2899343224/in/photolist-5qcTJh-4jyyAv-4jyQzL-4jyGZq-4jCo2J-6WZ56j-7Ctr1e-diZBhr-nkU7kw-5SFFDc-dwmjSK-akbhpK-diZAYt-akdraC-aiEodf-89gnHv-akdsP3-akds89-ake5x1-7DecNr-aiByDk-8m9srb-btupZY-7XoEvh-7Xm32r-7XkqK8-8m5ZVF-8m9sqG-4juKkg-4jyfsd-4juK16-4juf2P-4juKqz-4jyKgy-diZzvW-77ixsM-6nzbfw-4juybR-5zRMi9-e8rnEM-4TqKQG-bQMWVn-diZBmp-diZz8Y-diZzg9-diZznL-diZAVt-diZB66-diZBci-diZBjD

• Two Cow Economics: https://www.flickr.com/photos/keenepubliclibrary/4465347364/in/photolist-7NA5cE-aJuoqt-dgWLUB-bzEQXB-9Xity2-iwu7oK-5zuozU-c2fh9j-77pqVv-jgJUWE-9qQzN6-4i7joX-kcawjp-9nM3Fj-4TPkWw-5Bcgb1-bUBXnG-4jyFEb-5JNeTX-8Dn332-5HiA9p-5S8n6W-8pBySW-bB1dDP-4WdMis-4jCAnW-ie9vS1-hGkziy-6HAbU1-efy2tX-4ARFG5-6Hw9Nr-4S6kaT-4jyxZP-eJAVaY-4juBDD-4ARHFy-dM1ZuP-4MB4ds-75VMt5-4jCAvG-gV7HL9-81hvQV-eQ4y4h-9Xmmds-faeGEp-4JfCQM-68HYji-55FkZL-71shSK/

Photo Credits

Sources• White Paper: “High Performance Computing: Capital Markets”, CDW• High-Performance Trading: Cisco High-Performance Computing Solution for

Financial Services• Standby for light speed: high performance computing in financial services,

Banking Technology, David Bannister• White Paper: “Use of big Data Technologies in Capital Markets”, Infosys• Big Data and Smart Trading, How a Real-Time Data Platform Maximizes

Trading Opportunities, SAP• The Globe and Mail:

http://www.theglobeandmail.com/arts/television/new-cbc-head-to-undo-predecessors-controversial-legacy/article562370/

• The Globe and Mail: http://www.theglobeandmail.com/technology/gadgets-and-gear/dont-own-a-pvr-do-you-like-watching-28000-commercials/article4171233/

• White Paper: Regulatory Issues Related to Financial Innovation, Stephen A. Lumkin

• JP Grownder’s Blog: http://blogs.forrester.com/jp_gownder/13-12-30-predictions_for_2014_computing_technologies_in_the_age_of_the_customer