Capital Markets firms to migrate to investment banking: BearingPoint

According to a new study by management and technology consulting firm, BearingPoint, the potential stock exchange consolidation happening today – exhibited by developments such as Euronext's merger talks with the NYSE Group and the Deutsche Bourse – is a forerunner to the migration of exchanges in to the world of traditional investment banking.

This is driven by the exchanges' need as public companies to identify avenues for growth, notes the study, Shifting From Defense to Offense: A Model for the 21st Century Capital Markets Fir. The study also establishes that capital markets businesses will use technology to develop more detailed client profiles than earlier, enabling such businesses to deliver customised products and services to individual client needs more effectively.

Top executives from leading capital market companies were surveyed to find out how these businesses are already transforming their operations in preparation for the challenges in the decade ahead.

The study also found that capital markets firms will need to establish an organisational structure that maps to their clients' "investment DNA" with a centralised view of client data across all business lines and products. This will allow banks to provide a consolidated risk and finance profile of each client, as well as the necessary information to design custom products for each client's portfolio.

The shift from commoditised to customised products, will require highly efficient processing capabilities and the development of a responsive, open-ended technology platform that will allow companies to be more nimble and creative than ever before, adds Formant. He also pointed out that another result of this new client-cantered focus may be that many of today's largest firms could find themselves splitting off advisory and product development functions.

The global study cited key technology enablers that should be considered:

• Enterprise client management: Middle- and back-office functions will be reconfigured into massive processing utilities, leaving capital markets firms focused on the front end.
• 21st Century data infrastructure: By 2015, all forms of data, including unstructured data like email and messages, will need to be stored for internal and external audiences.
• The role of emerging markets: Emerging markets will represent an important growth engine for the global capital markets industry, as their upper and middle class grows.
• Architecture: services and events as building blocks: As larger firms require more nimble IT support, service oriented architecture will become essential.
• Strategic risk management: Impending market restructuring legislation is causing the leading capital markets firms to take a different approach to managing risk.
• Process Automation: T+0 and straight through processing: By the year 2015, the widespread implementation of straight-through processing is expected to happen.

The global study was developed in conjunction with Datamonitor plc, who conducted the study for BearingPoint based on interviews with the top executives at leading capital market firms.