INDATA President: How regulations like MIFID II drives innovation in asset management

By Alara Basul | 7 June 2017

INDATA is a leading industry provider of software, technology and services for buy-side firms. The company’s portfolio includes asset managers and boutique investment firms, varying in assets under management  from $1bn to over $100bn across a variety of asset classes.

bobsguide sat down with Dave Csiki to discuss the asset management industry, implications of MiFID II, and how the financial services industry will be affected.

Tell us about INDATA and your role in the business.

INDATA provides software, technology and services for buy-side investment managers. Asset and fund managers make up most our clients. Our niche is what we call the diversified asset manager; where they have a range of vehicles and funds as well as separate accounts. A typical client profile would be a fund manager with a dozen different strategies and variety of systems, and the businesses themselves are typically specialised investment boutiques.  

The technology is what we provide first and foremost, with a private cloud solution which is unique as it is purpose built and bespoke. Each client within our cloud has their own dedicated infrastructure. We’re not utilising the retail cloud, and the reason for that is the type of data that we’re housing on our system - it’s very proprietary and the best practice that we’ve found is to house this data privately.

A big part of what we’ve been working on since 2014 is integrating big data tech into our overall technology tool kit surrounding our software applications for portfolio management, trading, compliance, and other areas. A lot of people think about big data as what companies like Google and Amazon are doing – to have all this consumer transaction data that’s out there and being able to mine that data for business insights. For our clients, they have data that are locked up in  silos, in Excel, and with market data providers, so what we do uniquely with the big data tech is integrate the firm’s investment data into a common source, to create better a business intelligence resource across data sets.

Big data solutions use in-memory computing which is much more scalable. In the past, you would think about building a data warehouse, but this requires a lot of money and programmers, which is not the primary business of the typical investment manager. We’ve integrated this big data infrastructure into our cloud so that it’s on demand and our clients can easily integrate all their data into a source and use it for business insights.

We also do a lot of servicing around that. Many of our clients say a big trend in the industry is outsourcing; you can save costs instead of running things in-house, and another aspect of it is oversight - our managers are looking for IS checks and balances, and having an operations partner that will look after your data and software applications. Traditional outsourcing is also a growing part of our business.

Are the UK & US your biggest markets, or are you focusing on any emerging geographies?

Primarily we have a big focus on those two geographies but we’re also looking at other regions. A lot of our clients have European offices and they’re also investing in other markets. What we’re seeing with our clients is that some are getting further into the emerging and frontier markets, which is really exciting for us. As these regions are extremely different in terms of factors such as regulation, our clients are often looking for guidance for specialized topics including their compliance rules and tracking capabilities that our software provide. We’re very well specialised from an international perspective.

What are the biggest challenges you expect with MiFID II?

Certainly managing the data itself is a challenge. You’re dealing with a lot more data; it’s not inconsequential the amount there is. For example, on the trading side the MiFID standard is going to require tick-by-tick reporting. A given block trade can have hundreds of different venues that the trade is done in. You have to have the systems to be able to keep up with that. A big part of MiFID II is that the daily requirements are increasing, and our tech tools and software applications are helping our clients  with that.

The other aspect of MiFID II that is going to be challenging to some people is the notion of integrating front and back office systems. In order to conduct MiFiD II transaction reporting you need to have access to a lot more data. Regulation drives innovation in our space, so we look at this as a positive development. If you look at all the tools that you’re using to be MiFiD II compliant, you have a lot more data now and you can actually utilise that data a lot more than before.

What fuelled the decision to move over to in-cloud computing rather than the traditional methods of reporting?

We launched our cloud in 2011. We did it then because, as a provider, we’re watching technology closely, and when we know that it’s fully ready we move quickly. When we launched our cloud solution it was fairly new to the industry, but we have made great headway. And now, a client will come to us expecting our software to be cloud-based more often than not.

Previously investment software was housed on systems and servers in the clients’ offices or their own data centre. The cloud has been a great success for us, what we’re doing now with big data is possible because we made the investment in the cloud technology infrastructure we now have in place.  

2015 was the year that INDATA grew the most as a business. What did you do differently in that year?

A number of different investments that we made in terms of our product offering really took off. The two biggest of those were iPM Cloud and our big data offering called iPM Epic, which is the version of our software that supports the big data tech approach. 

In terms of data solutions, what are the biggest challenges you see and how do you combat them?

Data management is a constant challenge. When we visit any given fund manager, more often than not they’ll be using different systems and their data will be locked in different silos and formats. A client may use a handful of market data providers, for example, and each one of them has their own challenges in terms of how the client can access data from these systems. There’s a constant struggle for the clients to do this on their own, so a big part of what we’re doing on the data management side is being able to “plug in” to the different providers. If you look at the market data providers, when a client signs up with INDATA, this comes as part of the kit that they can plug into.

APIs are being discussed heavily right now, which I think is a significant trend. APIs are evolving data management and how it can be made more efficient. To that end, we recently launched our Epic Data API product, which we are very excited about.

How will API’s affect the asset management industry, and what other trends or predictions do you have for 2017?

Open APIs really have the potential to create enormous advantages for our clients. If you think about the idea  of 'plugging in' to other systems, it’s a very big challenge and very difficult to implement, so having an effective solution in place for our clients will be key for their success.

Another trend we see is the expanding definition of compliance. For INDATA and our clients, compliance means end-to-end activities, not just pre or post-trade compliance, but keeping an auto trail of every single thing that they do that touches the investment process. Another development that we see is the continuing debate with regards to active v passive investment strategies, each of which has its own set of technology requirements and solutions that continue to evolve. 

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