Upgrading Legacy Systems is the Only Way to Keep up with Regulatory Uncertainty

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Lots of news lately on the regulatory front: In the US, the little known FFIEC issued a statement stressing that banks assess the risk of new technology, such as the cloud, while the well known SEC voted 3 to 2 in favor of a consolidated audit trail system to monitor and analyze all trading activity. In Europe, MiFID II has been delayed until at least September and the UK House of Lords has raised potential issues with the impact of these regulations on the financial services industry in the UK.

What does this mean for the buy side? It demonstrates¬†that the regulatory environment is as changeable as it is unavoidable. Contrary to the FFIEC”s vague statement, the only way to keep up with regulatory uncertainty is by deploying the latest technology and not waiting around and doing nothing due to the perceived “risks” of deployment models such as the cloud. The cloud is only a method of deploying IT infrastructure that shifts the burden of hardware and software to a specialized provider as opposed to the firm itself. It goes without saying that firms need to do their due diligence with their technology providers, whether cloud-based or otherwise, so the statement seems to demonstrate a fundamental lack of understanding of what the cloud really is.

As with any industry, there are leaders and laggards and those firms that invest now and do their due diligence on the technologies and providers that they will need for the next 5 to 10 years will come out ahead. Firms that choose to stay idle put themselves at greater risk, in addition to not gaining any of the competitive advantages that modern systems can provide, such as the ability to rapidly grow assets and improve the bottom line.