Big data tools can help analyse a lot of unstructured data like corporate filings and indicators (macroeconomic and microeconomic) to help inform investing decisions.
Sgt Pepper’s Lonely Hearts Club Band. Paid in Full. Time Out. All these are names of ground-breaking albums in their respective genres – Rock, Hip Hop and Jazz, in that order. These albums set a new standard of doing business. They became industry royalty.
In a similar fashion, for the 21st Century intermediary, a new standard is being set. A new paradigm is emerging. Enter the new world of big data and analytics.
According to the Top 10 Trends in Capital Markets 2018 report by Capgemini, data analytics is not only listed as a mainstream trend but is now considered as a critical business tool. Fronted as an answer to some key challenges facing most intermediaries; operational cost pressures, regulatory reporting, thinning margins and so on, the trend is quietly gaining momentum.
With it, the whole ecosystem – investment banks, stock brokers, advisors, fund managers, custodians, and exchanges – now has a chance to transform its massive amount of data into useful and actionable information.
To further make the case for tech, a recent survey by Infosys (Big Data in Capital Markets, 2017) showed that 93 per cent of capital markets executives agree that it’s important to use technology to gain a competitive advantage. The world is not enough to explain the full range of benefits. But for our sake, I’ll highlight only three.
First is the opportunity for brokers to differentiate their product offering. The reality is that most brokers have not differentiated their brands. And as competition has heated up, smaller players are barely biting the pie – currently, five out of the 22 brokers account for nearly two-thirds of industry revenues.
To stand out, brokers have a tremendous opportunity to leverage on data analytics to create new value propositions or improve on existing ones. Their massive data troves – whether operational or transactional - can be processed through big data and act as a game changer. Other broker benefits include; prioritising profitable clients, optimising sales strategies etc.
Secondly, trading strategy. According to Infosys, by using unstructured data like the news feeds or social media streams, big data systems can perform a sentiment analysis that can help investment managers decide on their trading strategies.
For instance, during a market event (like the 2017 election season), a quick analysis could’ve helped choose appropriate stocks to maximise revenues and minimise losses.
Further, big data tools can help analyse a lot of unstructured data like corporate filings and indicators (macroeconomic and microeconomic) to help inform investing decisions.
Third is trade surveillance. To complement the efforts of the nine-member Capital Markets Fraud Investigations Unit (CMFIU) team, the regulator can make use of analytics.
As humongous volumes of data get generated – last year, seven billion shares worth over Sh170 billion exchanged hands—big data tools can efficiently sift through these massive data sets, analyse and create logical patterns to help the regulator perform this function. It’s good to know that they are already planning to upgrade their surveillance systems.
Undeniably, this is a great tool. Besides, it’s already shown its tremendous value to other industries. It’s time to integrate this capability.
Mr Mwanyasi is the founder of Canaan Capital Limited.
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