Technology and Stock Markets: Nothing Bearish here

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Can too much regulatory control stifle new tidings? Can more gadgets in the hands of consumers translate into more mutual fund investments? Can smarter dashboards alert market participants at split-second speeds? A technology advocate asks

Interviews | by Pratima H

NEW DELHI, INDIA: At a recent NSE Futures Tech conclave, conversations flitted around unusual topics like real-time dashboards, cloud enablers, risk management and compliance with new contours. The accentuated role of technology in a so-far orthogonal space like stock market, looks much more than a frivolous fad, when you talk to Umesh Jain, the Chief of Technology at National Stock Exchange and CEO of NSE Infotech Service.

Responsible for all technology-related matter at NSE, and having earlier wielded titles like Sr. President and CIO at YES Bank, as well as a remarkable stint at Citi Bank for 13 years in various leadership roles; Jain offers a fresh view of why today's markets are getting bullish on new-fangled technologies from algorithms to virtualization. Alongside, he calculates why betting too much on vulnerability-fears or tech-consumerisation may not be a long-term investment idea.

Cloud continues to appreciate as a pet topic even today. How does its force and options like virtualization play out in financial markets?

There is a lot of opportunity here for Indian capital markets, specially for affordable and accessible technologies. Such technologies bring down complexity for the guys using it. Analytics-as-a-service tools exist with larger organizations today but for smaller ones, access to such services is not entirely feasible. Cloud service providers can look at these segments and provide something for specific needs. Can we come out with insights beyond basic data for investors, for instance?

Algorithms have come a long way in stock exchanges? Have they yo-yoed a bit for India in your view?

When it comes to tick-by-tick market data reading, we are at par with the world. There is also an advantage of not being stuck with any legacy. Both Nasdaq and NSE have the same cutting-edge benchmarks. A lot is happening in the Indian space, and with use of technology, brokerage spread is going down, interfaces are getting reduced and more reliability is building up.

Do outages like the NASDAQ one; have serious bearings on how these markets embrace technology shifts?

It's interesting how shut-downs and other controversies are immediately attributed to technology, but is there any evidence of a direct correlation? Do we talk enough of efficiency, transparency, less-broker interface and other upsides that come with IT? Of course, a lot of issues happen and regulators are taking steps. Sometimes it helps that a technical glitch does not translate immediately into multiple markets. Innovation always comes with its share of risks. It's about controlling risks with unforeseen variables and dependencies on ecosystem that are sometimes so complex that they can leave you a tad less-ready. If all regulations are water-tight then room for innovation gets smaller. One should tread cautiously and in an informed way as best possible. Some issues have to be sorted as they happen. Have procedures and methods in place and be ready for circumstances, but you have to get up, dust yourself and move on.

Has the rapid consumerisation of technology opened new market segments for trading vertical?

There are two parts to it - awareness of financial markets and tech-enablement. Indian market is still inclined towards gold or realty investments. If you are talking about front-end exchange technology, yes a lot has changed, but if you look at the mindset for mutual funds or shares etc, am not sure of any significant change. That's where we have a financial literacy effort so that more money and more productive (rather than dead) investments roll in. Technology provides equal access to everyone but the milestone of financial awareness is still to be chased. That's where real-time visual technology gets interesting.

Is that why real-time dashboards pulled in attention at the conference?

Yes, this subject was covered very extensively. Big Data, needless to iterate, is a big force, with all those Vs of Velocity, Variety, Volume etc. Can you imagine a cockpit with a speedometer or a dial which alerts a pilot with a red beep or a green needle in a way that crystallizes all the number crunching easily for him/her? That's what dashboards can do here.

Is this perception right that when things get more automated, it makes it easier for the bad guys to sneak in?

There is a lot of debate and too much discussion around that. For better audit trails, better risk monitoring, technology is a good tool. In fact so many frauds on the manual/legacy system side never get reported and tech-side parts get highlighted often. If you were to look at manual vs. automated trading systems, you would know that we are far more sensitive on the other side than is usually perceived. Does technology adoption open more avenues for fraud and loopholes? But there are ways to safeguard that too, except for certain circumstances. That too can be handled in a reactive sense, as it happens. A market with some tech-savvy factor is far cleaner and transparent for an average retail investor. Technology provides instant answers, surveillance systems and far more superior and robust places to trade.

Mobile revolution - how impactful?

Since we don't deal with investors directly but banks, it's hard to see how many people are using mobile for trading in capital markets. Will it replace desktop platforms? Am not too sure, and I guess it will saturate soon.

How do you summarise prospects for technology in financial markets ahead?

In the next couple of years, use of data in social media with corresponding analytics will grow a lot. Can that be leveraged for informed trading by an investor or can risks be managed better by a broker or can use of surveillance for risk management be extended? Those questions would be interesting.