Communications, Compliance, Community | The Financial Technologist

As IPC celebrates its 50th anniversary at the forefront of innovation in communications and connectivity technologies, we reflect on how global financial markets have evolved since 1973, and how IPC Systems has supported market participants to flex and adapt to ever changing industry trends and challenges. It is a remarkable accomplishment for a fintech firm to have been around for 50 years and to remain the leader in our industry. Our journey began in 1973 when IPC’s pioneers were approached by financial firms seeking an expert partner to provide vast improvement to unstable and unreliable trading communications tools. This request gave rise to the birth of the very first trading communications device – the IPC Series 1 “turret” –that dramatically reduced trader downtime associated with mechanical solutions. The Series 1 turret was adopted quickly and globally by market participants and, from that point on, IPC has grown to become the global leader in trading communications and connectivity technologies, with over $1 trillion of daily trading business transacted every day over our financial markets network. “From our first engagement to today, our strategy for success has continued to be built on the foundations of close collaboration and cooperation with customers and industry partners – it is an essential element of our corporate DNA”. 50 years of radical technological advances Like many other industries, the financial markets ecosystem has undergone significant evolution and change in 50 years, not least with respect to the rise and rise of fintech as an industry segment in its own right. In 1973, banks were starting to look at new-fangled (main frame) computers to support banking operations. It was also the year that the SWIFT payment network was launched, heralding the first ‘automated’ payment systems (domestically, then cross border). By the 80s, turret communications technologies on trading floors were being augmented by the first quasi-electronic trading boards that enabled brokers and traders to reach and talk to each other more readily. The ‘FinTech Age’ in financial markets trading really took off in earnest in the mid to late 80s, with the advent of the first automated trading tools. These evolved quickly from basic, screen-based communications solutions to more sophisticated rate distribution, conversational (RFQ) trading, and later, price matching systems that revolutionized the way traditional markets were traded. The 80s saw the technology-led ‘Big Bang’ that transformed equities trading, and by the 90s, FinTech advances had revolutionised FX trading floors with the advent of electronic (automated) conversational RFQ networks such as Reuters Dealing. 2023 is also the 30th anniversary of the launch of the EBS (Electronic Broking Services) price-matching platform that very quickly became the dominant venue for interbank spot FX trading. EBS was followed in short order by other technology-led market innovations including the CLS (Continuous Linked Settlement) FX settlement venue. Despite the view from traditional voice brokers at that time that electronic trading could never catch on because ‘a computer can’t buy you a beer’ - or reflect the nuances of market sentiment – electronic trading quickly became the dominant method for financial and capital markets trading and today, the majority of wholesale trading activity for equities, FX and fixed income is transacted through e-exchanges and e-matching venues (increasingly using automated and algorithmic trading technologies and strategies). Connectivity and communication – key drivers of an effective trading ecosystem While today’s trading environment may look and feel completely different to 50 years ago, technology evolution in financial markets has always centred around the two key drivers of connectivity and communication. It is also important to note that no markets - nor transaction lifecycles - are completely automated/electronic from end to end. Despite continuing ‘electronification’ of trade execution workflows, there IS still a vital role for voice communications technologies. Even when trades are routed through electronic channels, trading professionals still use voice, chat and email channels for associated pre- and post-trade activity in the transaction lifecycle. The pandemic (and post-pandemic ‘new normal’) has underscored the fundamental requirement to connect this multitude of communications channels together efficiently, in order to enable traders to work away from the trading floor exactly as if they were on the trading floor, on mobile phones and in home offices, while remaining compliant with employers’ and regulators’ onerous trade surveillance, security and data protection obligations. There is significant demand for ‘soft’ trading environments, including virtual turrets, that replace physical trading desk hardware with software-based applications, fully integrated with other trading desk tools and accessible on and off physical trading floors. Not only has electronic trading created workflow efficiencies for traditional market players. It has also opened up a previously exclusive interbank ‘club’ to a broader and deeper financial community, including investment managers, retail firms and increasingly, non-traditional, technology-led firms. Today, traditional exchanges and venues share the stage with multilateral trading facilities, alternative trading systems, electronic communication networks, dark pools and crossing networks, all of which require interconnectivity and interoperability. More recently, the advent of digital assets and technologies are introducing myriad new players and potential trading connections into the trading supply chain, bringing with it the potential evolution of traditional, centralised markets’ infrastructure to a more decentralised, democratised approach to financial services and transactions. Financial markets have certainly come a long way in a relatively short time from a trading environment of open outcry pits, broker ‘voice boxes’, telephones and telexes, with manual trade recording, reconciliation and settlement. Not only has technology transformed the trading function, it has also opened up financial markets (and access to them) to more and more participants, trading venues and ‘end points’, all of which need to be connected. In this 4.0 technological age, with an increasingly techno-savvy demographic occupying traditional trading roles, technology has to tick many boxes. An increasingly ‘distributed’ workforce, particularly post-pandemic, requires highly interoperable, multi-channel communications that must satisfy ever more rigorous transparency and conduct-driven regulatory compliance obligations. Beyond this, it must also be able to capture, consolidate and distribute market data from multiple, multiplying end points, and integrate it within internal and external workflows. We know from talking to customers that investment in new trading-related technologies, systems and platforms is a key business driver in the next few years, particularly in relation to the establishment of a fully connected, fully integrated trading infrastructure that links together all participants in the ‘trading supply chain’ – sell and buy side firms, platforms, exchanges, clearing and settlement systems, custodians, market data providers and all. We are very much looking forward to rising to this challenge and supporting customers and financial markets for the next 50 years. You can read Bob's article and further industry insights in the latest edition of The Financial Technologist. Download your free copy here.