There’s more than hockey going on in Canada.
Hi-tech has gone north of the border – Toronto to be exact.
That is where Mark Notten is now the CEO and Co-Founder of Tier1 Financial Solutions (which recently rebranded from Tier1CRM) in 2008 together with Phil Dias, a partnership spanning over 30 years. Mark began his career at Systemware Innovation Corporation (SWI.com), creating mission critical software for the telecom and nuclear sectors. This led Mark`s first CEO role, as founder of Halcyon Monitoring Solutions which created flagship software products for Sun Microsystems and Cisco. [IMGCAP(1)]
Mark's vision of Tier1 was to create world leading enterprise cloud-computing software to power the institutional sell-side and buy-side. Under his leadership, Tier1’s products are currently being used by tens of thousands of users across a prestigious client base in sales and trading, corporate and investment banking, and investment management.
Mark Notten, Tier1
Notten is now the CEO & Co-Founder of Tier1 Financial Solutions, a provider of global relationship management software for capital markets. Traders Magazine’s John D’Antona Jr. recently sat down with Notten to discuss the digital transformation of the buy-side and sell-side engagement.
Traders Magazine: What are some of the key factors that are driving the shift in the relationship between the buy and sell-side?
Mark Notten: Due in part to financial regulations such as MiFID II implemented last year and other factors at play in the capital markets ecosystem, traditional responsibilities are now shifting, and the roles are beginning to blend. The ways in which the sell-side delivers value to the buy-side requires constant contact with clients via continuous content-rich interactions. Buy-side firms are currently changing the way they derive trade ideas, such as written research, corporate access and analyst briefings, which is precipitated by two drivers: cost and regulation. This dynamic results in a need for greater insight and collaboration with all market participants. Consequently, the information and tools needed are also changing, which necessitates flexibility, modularity and innovation as the essential elements in the formation of an effective digital strategy.
Innovation, particularly for capital markets participants, is no longer a luxury; it’s essential. The structural shifts that are occurring have introduced a compelling need for firms to keep up or lose out. In fact, legacy platforms that inhibit the ability to rapidly adapt can lead to revenue loss and business risk by failing to adapt to changing regulations in time. Simultaneously, competition for share of wallet is increasing, necessitating that firms be more targeted in how they deliver service to their clients.
The most innovative and adaptable solutions are borne out of the spirit of true partnership between clients and vendors, built on open architectures to create best of breed business solutions that afford interoperability and multi-track innovation.
TM: How are the technology needs of the buy-side and sell-side changing? How do they currently differ from one another?
Notten: Professionals at sell-side firms are constantly striving for their next best call. They require the ability to serve up the right information at the right time to provide the clients they cover with trade ideas and market information that can generate alpha. To do this, sell-side firms need to be able to capture the constantly changing risk profiles and sentiments of their clients and make it available for instant recall to various desks, all with a “capital markets grade” security engine.
Another hot topic is how do they account for the value they’re delivering to the buy-side, and how does the buy-side measure and fairly pay for what they’ve received? Currently, sell-side firms report service delivery via a consumption reporting model, which we constantly hear is not optimal for either side. We see an opportunity to significantly improve this process via the spirit of cooperation and partnership. Both the sell-side and their buy-side counterparts have the desire to reduce friction and there’s an appetite to work together to improve the decades-long traditions of our industry. While certain aspects will continue to be done manually, there is a fair amount that could be streamlined and automated to give back time in the day for both sides, enabling them to focus on more value-added activity.
The buy-side is evolving and firms are looking to take a more active role in some of the practices traditionally delivered by the sell-side, including originating corporate access and managing their own research. In a world of having to do more with less, automation and standardization of processes is a requirement. Event planning, tracking research consumed, and the collaboration of ideas among colleagues on interest decisions can become so onerous that technology is now the only efficient way to help the buy-side alleviate the overhead of taking on these roles in-house.
One thing that we should anticipate is that there is going to be constant change in our industry. This is where I see Tier1 as being able to help. Because of our laser focus on purpose-built, relationship management solutions for the global markets and banking industry, clients see us as a catalyst to help accelerate their digital client strategy and to keep up with the ever-evolving capital markets landscape. We had a vision more than a decade ago to create business solutions that facilitate efficient, adaptable client relationship management between all market participants. We have realized that goal and are now investing in next level innovation for both the buy and sell-side.
TM: What do you think about what other fintech firms have done to enhance fintech offerings to market participants and the clients they serve?
Notten: What we’re seeing is a growing ecosystem of relatively early stage innovation partners that are doing really cool things with some early adopter customers. We promote interoperability with our open cloud-based architecture that allows these products to be “plugged in” to securely tap the client data and present seamless views to our user base. Our philosophy is to have our clients picking the winning innovation partners. The need for clients to have multiple solutions, each best-in-class, necessitates integration, and we find that software providers realize that partnerships are what facilitates best-in-breed solutions.
The idea of creating one big monolithic app and trying to keep up with every idea that users are asking for is impossible. Our efforts will be far more fruitful if we have multiple tech innovation companies collaborating to deliver new ideas into a product versus a team of programmers within one organization writing code.
TM: How has usage of the cloud changed as the dynamic between buy and sell-side institutions has evolved?
Notten: We are seeing a massive shift toward the cloud in capital markets on both sides of The Street. For instance, one of our customers has said that for each tech decision they now make, it’s not a question about if they should put that data in the cloud; it’s “why wouldn’t you?” When data and applications are moved into the cloud, it unlocks tremendous advantages with the level of flexibility and the speed that we can do things.
The typical reasons for why firms would avoid using the cloud years ago have been addressed. While cloud security has previously been a concern, most of our clients now view modern cloud platforms such as Salesforce as providing advantages over their existing application hosting. For example, most firms running their own servers don’t encrypt the client data on the servers inside their own shop. By contrast, pretty much all our customers have enabled Salesforce’s Shield encryption for client data. With the multi-tenant model, the level of security resources that are applied by cloud platform providers is massive, afforded by the large economies of scale. This results in cost savings and improved security so firms don’t need to spend their own time and capital on that.
It’s an exciting time for Tier1 and our capital markets clients are accelerating their investments in innovation thanks to the maturity of cloud computing. There is tremendous potential to strengthen the partnerships we have with our clients and allies to reduce friction, improve service, lower costs, and ultimately, serve investors better.
