After a six-year absence, it was refreshing to be in Asia once again for SIBOS, and even more refreshing to see the Conference being held in Mainland China for the first time. Fraser Wikner, CEO at MYRIAD Group Technologies (MGTL), looks at some of the main talking points to emerge from SIBOS in Beijing.
Distributed Ledgers – where’s the industry going?
The last time SIBOS was in Asia was back in 2018, when the event took place in Sydney.
During SIBOS Sydney, a lot of the conversations I had revolved around Blockchain, mainly because it was the chosen technology for which the Australian Securities Exchange (ASX) was planning to replace its legacy CHESS clearing and settlement system with. ASX’s Blockchain plans fizzled out in 2022, and while the Exchange is still upgrading its post-trade infrastructure, it is adopting a more conventional approach by using a system developed by TATA Consultancy Services.
So, is ASX’s experience a cautionary tale for Blockchain development or is the reality a bit more nuanced?
Although a lot of the people I spoke to in Beijing were quietly relieved that Blockchain sessions at SIBOS were few and far between, those panels which did tackle the issue of Blockchain featured some genuinely interesting use cases, particularly around corporate actions and private market fund distribution. This in marked contrast to Sydney, where talk about Blockchain was far more speculative, and arguably rather woolly.
I would recommend people read a recent paper by The Value Exchange, which noted that while there are fewer Blockchain proof of concepts (POCs) being launched in Securities Services, Financial Institutions are doubling down on their Blockchain solutions which are already live. [1]
While I do not think Blockchain has run its course, the technology’s applications will become more refined in Securities markets.
AI – Another technology hype cycle begins
Unsurprisingly, AI featured extensively at SIBOS.
Just as our industry got carried away with Blockchain, I believe it is at risk of making the same mistake over again, but this time with AI.
I also feel a lot of banks – buoyed by the public excitement about ChatGPT and other Large Language Models (LLMs) – have come under massive pressure to develop AI capabilities, but the reality is that many of their AI solutions do not deliver much – if any – intrinsic value.
Echoing comments made by Simon Shepherd, our Managing Director, at The Network Forum (TNF) Americas Conference last month, a lot of existing software can do much of what AI is promising, but at a fraction of the cost – hence why some of the big Banks are either shelving or winding down their various AI initiatives.
As one cynical SIBOS attendee told me, it is only really the big consultancy firms advising Financial Institutions on AI strategy who stand to benefit from this latest hype cycle.
Operational resilience continues to consume resources
Operational resilience was a big theme at SIBOS in Beijing, particularly among Financial Market Infrastructures (FMIs).
This should not come as a huge shock, given the litany of crises we have so far faced in the 2020s, and the decade is not even half-way through yet! Notwithstanding pandemics, war and market volatility, the industry’s concern about cyber-security risk continues to grow.
I heard one European FMI highlight that their cyber-security spending has increased astronomically over the last decade, with many firms seeing it as one of the most pressing risks facing the industry today.
Regulators are also prioritising IT resilience with the EU’s Digital Operational Resilience Act (DORA) going live in January, which among other things will require Financial Institutions to have processes in place to mitigate against IT risks, together with a robust business continuity plan.
I expect the industry’s focus on operational resilience is only going to intensify.
2025 – the year of cost optimisation
At a time when Custodians and Brokers are facing mounting costs due to challenging headwinds (i.e. higher inflation, clients applying downward pressure on fees, regulation, e.g. Central Securities Depositories Regulation, and market changes, i.e. the introduction of T+1 settlement cycles), a lot of organisations I spoke to SIBOS are looking for ways to extract operational savings.
One easy win here would be for firms to get on top of their invoice management.
Performing invoice management in-house is another layer of cost and requires significant infrastructure investment. Compounding matters, we often see firms not updating their infrastructure, leading to inefficiencies and errors.
Increasingly, Brokers and Asset Managers are turning to software providers, such as ourselves, to support them with ancillary activities like invoice management. As a single platform, MYRIAD™ enables clients to move away from a siloed operating model, allowing them to access information in a centralised location and facilitating significant operational and commercial cost savings.
I anticipate this trend of firms using software providers to help them navigate the intricacies of invoice management will continue as they look to optimise costs.
Next stop – Frankfurt
After a successful Sibos 2024 in Beijing, the Conference returns to Europe, with SIBOS 2025 due to take place in Frankfurt.
[1] The Value Exchange – DLT in the real world 2024
