Tech plays vital role in capital markets

NEW DELHI, INDIA: As the capital and commodities market is banking high on technology advancements, the sector is poised to see a transformational change.

With high dependency on technologies, the trading firms are making huge investments on innovations.

Speaking to CIOL, Abhishek Bhattacharya, director- Technology at Sapient, said that technology plays a massive role in the capital and commodity markets. "In fact trading firms are the first ones to leverage any cutting-edge technologies to get pulse of the markets, execute trades and measure risks faster," he said.

At present, massive investments have been made on algorithmic trading and high frequency trading, Bhattacharya said. Whether it is complex algorithms and Monte Carlo simulations to do valuations, or connectivity to exchanges, technology has been at the forefront of capital and commodities market development.

"Technologies like FPGA (Field Programmable Gate Array), Complex Event Processing, Machine Readable News technologies and Grid Computing, which are at the cutting edge of technical advancements, are being regularly used in capital and commodities markets," he said.

During the past three years, capital and commodities markets have undergone massive disruptions. In reaction to the global financial crisis, most governments are bringing massive regulatory changes, like Dodd-Frank Act in USA and Basel III in OECD countries.

The business challenges bring to the fore technologies like process grids, elastic application containers, complex event processing, in-memory databases and real time databases. The new regulatory regime, at some level, Bhattacharya believes would bring fundamental changes to the way business is done in the capital and commodities

markets.

It is also bringing several significant technology changes like massive reporting requirements, requirements around connectivity and integration with new entities like SEF (swap exchange facilities) and SDR (swap data repositories); moving from end of day risk management to more proactive and near real time risk management.

As security has become key critical aspect for the sector, several communication standards like SWIFT (Society for Worldwide Interbank Financial Telecommunication) provides strong encryption support. "The majority of international inter-bank messages use the SWIFT network," added Bhattacharya.

At transport layer there is TLS (transport layer security) and SSL (secure socket layer), which are used to encrypt messages over the Internet. Pretty much every communication over Internet can be encrypted using asymmetric cryptography, he informs.