Aligning Business, Technology, and Operating Models to Thrive in an Evolving Competitive Landscape

Changing product dynamics, fee compression, geopolitical unrest, weaponization of commodities, and an aggressive regulatory agenda have been recurring drivers in the capital markets industry. As the broader capital markets ecosystem enters 2023, it is tempting to think the same long-term trends will shape the coming year, and perhaps they will. But Aite-Novarica Group believes there are more fundamental changes coming.

Across the capital markets ecosystem, firms have been “evaluating” or “piloting” everything from new technology solutions like fixed income EMS platforms to DLT programs, data in the cloud, and new products like fixed income portfolio trading, to name a few. 2023 will likely be the year a number of initiatives hit an inflection point and begin to fundamentally alter the landscape.

Aite-Novarica Group believes 2023 will be the year when firms revisit and adapt core business and operating models to compete in the evolving market. Technology and service providers will play a large role in creating new and innovative ways of lowering costs and offering capabilities that level the playing field from a pure product and process perspective. Many of those technology providers will help democratize access to solutions for small and midsized institutions, and some of them will redefine their own business models in ways that make them future competitors. 

One thing is crystal clear—crafting your strategy around target markets, products, and solution offerings and aligning your business architecture to achieve those goals is critical. Market conditions mean firms are going to have to be laser-focused and choose their technology and service providers carefully in the year to come. 

Aite-Novarica Group identified 10 trends that will impact global capital markets in 2023.

Aligning Business, Technology, and Operating Models to Thrive in an Evolving Competitive Landscape

Three of those trends are as follows: 

  • The hype over data in the cloud falls back to earth: The transition of moving data to the cloud has been widespread across the capital markets industry; however, many are realizing that it doesn’t automatically solve the fundamental issues of data transformation, normalization, and integration, leaving challenges that need to be addressed. Going forward, the transition will continue, but the excitement over data in the cloud will be brought back to reality as firms work to address those challenges.
  • ESG remains the Wild West: Despite recent progress with ESG and sustainability-related regulation, ESG will remain a polarizing and confusing topic in 2023. The lack of alignment between key regulatory regimes around the world will likely lead to increased divergence in the industry while challenges around the quantity and quality of ESG data will continue to impact capital markets firms.
  • Non-equity electronic trading gets outfitted with new specialty tools: The past few years have witnessed significant market structure change within the U.S. fixed income marketplaces. Perhaps nothing has been as transformative as the near doubling of total trade volume market share for electronic workflows. Behind all this growth is a new breed of trading tools that are helping traders better navigate an increasingly fragmented and opaque fixed income liquidity landscape.

To learn more about the rest of the top 10 trends for capital markets in 2023, read our full report Top 10 Trends in Capital Markets, 2023: Aligning Business, Technology, and Operating Models to Compete in an Evolving Landscape and register for our February 7th webinar covering these trends.

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