Capital Markets Outlook 2013: Innovation While Cutting Costs

As 2012 draws to a close, it almost seems as if these final months are some sort of bad sequel akin to Groundhog Day, the 1993 movie where the star, Bill Murray, would wake up and repeat the day's events verbatim. However, this is real life and the closing months of this year resemble the final months of last year in many ways (except for the election, of course).

In November 2011, the world and the financial industry were waiting to see what would happen with the Greek debt crisis. Today, that fiasco isn't completely settled and other countries (Ireland, Spain and Portugal) are now tangled in the European sovereign debt crisis, also known as the eurozone crisis. In the capital markets, an entire year has been virtually lost, as investors sit on the sidelines waiting to see who defaults, who gets bailed out and, worse yet, whether the euro will even survive.

The year of uncertainty is being felt across the global capital markets. True, most market-tracking indexes are up year over year, but trading activity has cratered. In addition, one gauge commonly used to measure investor sentiment--money flowing into mutual funds--has seen assets stream out of stock mutual funds since 2010, according to Investment Company Institute data.

This collective uncertainty has left capital markets organizations on hold. Industry revenues are declining, since trading volume has dropped while income from other business lines (mortgage-backed securities, proprietary trading) have nearly ceased to exist.

This leaves IT organizations across the industry trying to find ways to cut costs and streamline operations. Doing more with less has been the mission for the past few years, and it will continue in 2013. Even while trying to deploy innovative products and create cutting-edge technology, CIOs must contend with thin budgets and skeleton staffs.

Throughout our Capital Markets Outlook 2013 feature, you'll read about how cost concerns or declining revenues--or both--are helping drive technology decisions. There's a renewed focus on fixed income--specifically moving to electronic transaction methods to reduce costs. Firms with large data centers are consolidating and streamlining operations to cut costs and increase efficiency. Big data technology is helping manage a flood of data without breaking the bank; new analytics tools are letting firms efficiently provide the transparency that regulators require and investors demand. Lastly, there's a renewed push to redefine what is, and what is not, a core competency at a financial firm, with more and more business processes--such as fund accounting, human resources and accounts payable--falling into the non-core-competency column. The result? You guessed it: lower fixed IT costs as more business processes are sourced to third parties.

[GOLD BOOK 2012: A Focus on Growth, Innovation and New Technology ]

What's striking, however, is how most CIOs and IT units are taking all of the change and cost cutting in stride. Perhaps it's a recognition that this is the "new normal" for the capital markets and that the firms that can thrive and succeed in the current market will be in a great position for the next few years. On the following pages, you'll find Wall Street & Technology's take on the key topics and trends of 2013. Enjoy.