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The Smart Techie was renamed Siliconindia India Edition starting Feb 2012 to continue the nearly two decade track record of excellence of our US edition.

A rapid change awaits BFSI segment, thanks to new regulations

Prakash Kini
Director - Technology-Sapient Global Markets
Monday, March 5, 2012
Prakash Kini
Trends CIOs are concerned about

We are globally helping our clients in capital markets, commodities trading, and risk management. Financial markets that drive the economy and Global Economy are becoming more and more interconnected. From an investor’s point of view, they are looking at every little place they could make profits in. For example, all the investors are moving their investments in Europe and U.S. to Asia. Now they need to worry about the different trading systems that are required to regulate this. They want to get into that market with minimum risk. All these investments need understanding of the price shifts, regulatory compliance and knowhow of territorial risks. This requires a lot of technology, testing and quality assurance.
The other trend is that of a systemic risk. It becomes an important task to avoid the major problems that caused the global economic crisis. The players now want to collect data from different places and have a view of systemic risk or macro risk. Hence, a lot of regulations like Dodd-Frank are coming. So, we not only want the market participants to invest, but also central banks to invest too. The reason is that all of a sudden they are going to get a lot of data from people who are trading in that area. For example, we work with the European central bank where we are building a centralized data repository in which all the people are going to asset back security (security based on loans). This data is going to be collected and analyzed. All these aspects require investments which not only have operational risks but also reputational risks. From a regulation perspective there is also a systemic risk. Keeping all these in mind, lots of companies are trying to do more with less. We have CIOs from investment banks outsourcing some of their core functionalities. The size of this "over the counter business" is about $600 trillion. Asia could be around a 20 percent of this figure, India being an obvious part of it. So, when we see India competing against the big players, it is definitely a positive growth in an investment perspective. What they want to do is to outsource and build a structure where their people and we can work together as a team in a global structure. They are getting our help on complex number applications and they have to know that this is handled by the right people who will be able to build and continuously improve their systems.

Not only are we part of an external ecosystem which has all the market players in it but also an internal ecosystem where people can build a career in the global market. For example; in India we have a training program called the global markets institute, it takes the campus hires, lateral hires and trains to build the required capabilities. If we take testing for instance, they would not only need QA skills but also applied QA. Basically, we provide with a lot of training and development for our hires and this creates a higher value proposition to our clients.

2012 - Impact on the businesses

A large part of the OTC market came to a point where nobody understood what was being traded. A company could give loans and pass that risk to another company, which would then further pass it on to a next company through an instrument which is called the asset back security instrument. At the end of the day the fourth company might not even know how much risk they are taking on. This is not a good spot to be in, what is needed is transparency, so all the players in the trade knows what really is at stake and how it is going to impact the global economy. If there is transparency, then one big player cannot bring the whole system down.

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