2020 has been an highly unorthodox year for the financial services industry. The abrupt outbreak of Covid-19 has dramatically reshaped the playing field, imposing new opportunities and constraints for many companies.
Finance Magnates spoke to industry visionary, Tom Higgins, CEO, Gold-i to find out his views on the latest market trends and how the Coronavirus lockdown is impacting the technology requirements of financial institutions worldwide.
Have you noticed a change in brokers’ technology requirements since the Coronavirus lockdown?
Financial institutions tend to be tech savvy and brokers having to work from home have typically found it easy to access their work systems remotely.
They haven’t needed anything extra to be installed, although cybersecurity is a risk as they now have access to a lot of sensitive data on their home PCs and need to be mindful of this and address it accordingly.
From what we’ve seen at Gold-i, most brokerages are managing well from a day-to day perspective.
However, strategically, working from home is causing some issues. Many organisations don’t have the business intelligence tools or dashboards to gain a top line overview of their KPIs in real-time – whether for sales, CRM or to access data about their trading operations.
I’ve always believed that business intelligence tools are crucial for financial institutions of all sizes; however, the need for them has been exacerbated as a result of home working, with team members all based in separate locations.
I really don’t know how you can run a brokerage remotely without a centralised resource to provide an instant overview so that, at any time, you have a full understanding of your P&L and your exposure as well as where you are making and losing money.
You need access to this information on a timely basis in order to make key decisions to drive the organisation forward. Tools such as Gold-i’s Visual Edge are easily available and quick to install; they provide a level of oversight that is absolutely essential in order to manage an organisation effectively.
What trends are Gold-i seeing at the moment?
With the exception of oil, volatility has come back to a sensible level. Brokerages which have suffered financially from the impact of regulatory changes, particularly as a result of ESMA, are now experiencing stronger financial results, which is great news for the industry.
Over the last few weeks Gold-i has had a noticeable increase in the number of enquiries for our products from brokers of all sizes – albeit that the sales cycle seems to be extended as a result of home working.
Start-up brokers, for example, are in strong position as they can set up operations with virtually no staff, buying all their technology off the shelf and running their entire business remotely.
Larger, more established brokers are taking the time now to review their technology and assess if it is still fit for purpose.
One thing is for sure, the majority of financial institutions are no longer building and maintaining their own systems in-house – the cost is too prohibitive – and there’s no need when there’s so much choice available, especially for technology that can be customised to meet their exact requirements.
And that’s good news for specialist technology companies like Gold-i.
In recent years, Gold-i has increasingly focused on building its liquidity distribution network, MatrixNET. What do you think financial institutions need to be most aware of in terms of accessing liquidity?
Rather than select a Liquidity Provider based on their strong reputation in the market or high brand profile, the number one priority for financial institutions should be to select Liquidity Providers which are most suitable for their client types.
Of course, looking at other aspects such as reliability, reputation, spreads etc. should then be a key part of the decision-making process.
Financial institutions need have honest conversations with LPs about their client types and flow. LPs can easily switch off clients who don’t match their profile and, if the financial institution doesn’t have connections to other LPs, they will be left high and dry until they manage to sort out an alternative.
That’s why it’s important for the institutions to have access to more than one LP. With MatrixNET, smaller clients are typically configured to 2 or 3 LPs, and larger clients, who generally offer a wider number of asset classes, tend to have about 6 or 7.
This seems a sensible approach and it means that with a quick configuration change, they can switch to alternative Liquidity Providers should they need to do so at any time.
Gold-i was one of the first technology companies to offer a specific crypto product, with your Crypto Switch™. How do you see the crypto market evolving?
It is a growing market. The institutional market has evolved to the point that there are now a number of strong Market Makers in the main crypto assets.
The larger firms are using our Crypto Switch 2.0™ which provides a fully cleared crypto solution. They are aggregating to around 10 Market Makers and then settling their trades in a single place.
I think the crypto halving will result in a surge in interest in cryptocurrency trading. It will not be to the insane levels that we previously saw but it will be more gradual. Cryptocurrencies will be seen as a good additional asset class.
What is your advice to brokers in the current climate?
Hold your nerve, manage your risk and your business will survive and thrive.