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XML in Investment Banking

 Dresdner Kleinwort Benson  
Frankfurt am Main
 Germany 
Wilkin, Daren
 		Daren  Wilkin
Web Developer,  Dresdner Kleinwort Benson 
 1 Juergen-Ponto-Platz
Frankfurt am Main  (Germany) 60301 
Email: DarenCarl.Wilkin@dresdner-bank.com

Biographical notice
 
  • An experienced IT strategist keen on using Internet technologies to re-engineer inefficient business processes
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  • Recently completed a project for the distribution of information for 500 Fixed Income Sales people using XML and other web technologies.
    •  
  • Acts as chief consultant on Internet technologies to the global IT Director
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    Abstract

     Investment Banking is a pure form of information processing. A Bank's relationship to the rest of the world is effectively digital. To be effective,a Bank requires state-of-the-second knowledge of the world's financial markets and of the needs and desires of its customers. The web has begun to make a profound impact on the way our business is done. XML will be to the web what client-server systems were to the mainframe.
     

    Introduction

     Global financial markets represent one of the closest approximations to the concept of a "perfect market". They comprise large numbers of participants all of whom are attempting to capitalise on a vast amount of raw information that is available to them. Imperfections in the form of disparities in price or opinion in these markets are eroded in billionths of a second. These "edges" are the profits that in conjunction with well-managed costs enable dividends to be paid to the investment banks' shareholders.
     

    Problems

     Financial Institutions have always been adopters and drivers of information technology. But information technology creates its own problems. The worst suggestion to a participant in these markets is "You'll need to have system x installed". These people are often highly effective jugglers, managing telephones, faxes, tickers, multiple workstations, as well as information from colleagues. They are already experiencing information overload.
     Technology has made the world seem smaller. Banks' customers are often international organisations. They require access to capital markets wherever they operate in the world and demand similar expertise and knowledge from their financial institutions.
     Technology is empowering people and organisations with evermore information and, to some extent, knowledge. Increasingly knowledgeable and sophisticated customers pressurise their providers to meet higher standards and to provide innovative products. International organsations need to be able to quantify and manage their risk, on a global basis, to changes in foreign exchange rates and conditions in the markets in which they operate. To a large extent this increased sophistication has lead to the development of the highly profitable derivatives business which has required the development in new arenas of expertise within the financial markets.
     New participants, attracted by the seemingly large profits made in investment banking in particular, are providing innovative products and services using state-of-the-art technologies to further erode the margins of the classical participants. The Internet is a key component in the disintermediation between client and market.
     The biggest single, threat to the success of XML is inherent within it. There is an advantage for organisations to produce DTDs specific to their needs since, to a large extent, they will believe this is their only remaining differentiator. Companies have historically been able to tie their customers to them through the requirement to run their applications. It would be a shame for this to be simply pushed up the information hierarchy and manifested as a plethora of competing DTDs. The differentiator should be the quality of the underlying information. Consumers can help alleviate this problem by demanding compliance with standards from their providers.
     

    Goals

     XML can provide an elegant solution to some of these problems. Instead of focusing on delivering better, faster information or better, faster tools, XML enables us to focus on the value and meaning of the underlying information. With careful planning and judicious use of resources new, leaner but more specific systems can be developed that manage information from multiple sources. The systems will be able to summarise the salient points and deliver the results to the user in a form that is most effectively consumed and redistributed.
     Aggregation amongst banks within the industry can be more effectively managed. Information systems that utilise public-domain DTDs for the representation of their internal data structures, are easier to integrate. To some extent this may promote the development of loosely coupled organisations that outsource non-critical functions to partner organisations and that move in and out of the provision of products and services almost on-the-fly by teaming up and disbanding with each other.
     Business may reduce their emphasis on systems that produce equivalent but disparate information and focus instead on the information itself. By coalescing equivalent information feeds and integrating related information sources, a far smaller volume of information may need to be processed by both the human and system components of an organisation. This will not only reduce the strains imposed on these elements but it should also permit a more effective management of the information being conveyed. To some extent this permits a reduction in the number of "systems" that need to be managed which could lead to a reduction in the operating costs of IT departments. In fact, XML provides an opportunity for the creation of a whole new breed of true "knowledge workers".
     Finally, the knowledge-base produced may be managed and manifest in multiple forms dependant upon the requirements of the consumer and their situation. The modern working environment requires time spent away from desks and the provision of relevant information both to an organisations' customers and its employees via the Internet, mobile phones, palm devices and perhaps other broadcast media is only a matter of time.
     

    Conclusions

     Investment banks tend to be large, global organisations that rely extensively on technology. They operate in highly efficient markets where only the strong survive. A law of Entropy tells us that generally things tend to become more complex. Technology permits information to be sent around the globe in seconds, a feat almost unimaginable two decades ago. This has tended to make the world a smaller place and has enabled organisations to exist internationally and offer their products around the world. The size and efficiency of global markets tends to erode profits very quickly. To keep ahead of their competitors organisations must continually innovate. Thus in an almost deadly-embrace, banks must innovate to meet the demands of their customers, who are themselves innovating to generate profits.
     Complexity can be managed. Technology and XML in particular can be used to filter through vast quantities of information and present only that which is needed. XML simplifies information by reducing the number of forms the information may take. Today we may visit 20 news sites on the web to gather information that is important to us. If these sites organised their content along similar lines, a better solution would be for the information to be searched and then filtered based upon our requirements with the results being collated in one place for us to read. This is similar to the approach being taken by "portals" on the Internet today.
     A new, world order could become possible where organisations become synthetic versions of their current rather monolithic forms. To some extent this has already happened with the "rush" to downsize. Organisations need to determine what their core competencies are (revenue generators) and focus on them. Everything else becomes superfluous. As organisations offer their services via structures such as the Internet, it could be possible for organisations to outsource their non-core functions to whichever organisation (that it trusts) is offering the best price in the market at the time the processing is required.
     B2B, business-to-business 
     Microsoft 
     XSL 
    webMethods
     

    Examples

      Dresdner Kleinwort Benson has two systems in use today based on XML technology. Using webMethods B2B, the London-based e-commerce team has delivered a sophisticated portfolio-trading application that delivers up-to-the-minute trade, research and corporate action information to the trading desks. The application integrates seven, disparate settlement systems including legacy mainframes and document management systems, and provides traders with a comprehensive report that can be displayed in a web page, a Java ticker or an Excel spreadsheet.
      The second system attempts to provide a "portal" interface for fixed income trading. The goal of the system is to provide pertinent information from a variety of sources to the Bank's sales people across the world. The system integrates news from various Internet sources, Bond portfolios, Analytics and multi-media in the form of daily "Hoot'n'Holler" audio recordings. Microsoft's XML DSO applet and their XSL ActiveX control build the DHTML-based interface that is delivered to the user's browser. Eventually the system will be rolled out to the Bank's customers.
     Dresdner Kleinwort Benson seeks to maintain its competitive advantage through its commitment to leading edge technology.
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