How APIs are changing the financial markets

by Srikant Ganesan, Managing Partner, Risk and Trading Solutions

20 years ago, traders could only have dreamed of spotting and analysing trends in as much detail as they can today. End-User Computing (EUC) which allows trading desks to test and implement strategies with greater certainty and efficiency, has created an environment where complex orders can be developed and placed quickly to help financial institutions and individuals take rapid advantage of changing market conditions.

It’s not all plain sailing, though. Regulators are increasingly vocal about their concern that institutions do not have complete control over their EUC tools, while IT teams have pointed out that having multiple versions of the same tool, e.g. spreadsheets, saved to individual desktops, laptops, tablets and even phones, is redundant and inefficient. Spreadsheets are the most common EUC used in financial analysis where the processing demands are getting bigger and more complex thereby pushing IT budgets up.

There is, however, a solution to these and several other challenges: APIs. Even Goldman Sachs has realized the advantages of an API-driven market, and intends to transform itself into the Google of Wall Street: a place where people can come to manage and mitigate risk.

There’s nothing new about Goldman Sachs’ ambition, as financial institutions are in a constant state of evolution, changing roles, staffing levels and prevailing technology according to current market conditions. What is different is the way that the firm is looking to use APIs to achieve its goals.

Golden future

What is the vision that the leadership team at Goldman Sachs is working towards? Put simply, they are aiming to create a system that brings together data and information from a myriad of sources, whether it’s transactions, client and event data, investment or market research, and combining it into what they are calling their Data Lake.

This will potentially give their traders and analysts enhanced insights into market conditions; it could also become available for clients to dip into as they need, helping them develop more stable trading and investment strategies for themselves.

This could create a new revenue stream for the institution, with third parties subscribing to audited data rather than working through the bank’s trading desks. This is where the Google of Wall Street analogy comes in, with third parties researching their own ideas and trades through an API feed from the Goldman Sachs Data Lake, before (hopefully) executing through other Goldman Sachs trading systems.

A better way

In the context of a compliant financial services trading environment, an API is a suite of accredited data services that everyone within the company can access as appropriate. This avoids the need for people to bring their own data feeds into spreadsheets, and if there are common calculations that many people in the business need to use, the API can centralize those calculations.

APIs that operate on a Data Lake would not only keep data sources accredited, but will allow IT teams to reduce duplication among their software assets. Versioning issues will also be removed, as any changes that need to be made to the data services can be done just once and distributed across the company. APIs reduce time to market in response to changing market conditions or new thinking by traders.

If the calculations that drive half the spreadsheets in a company are being carried out once rather than multiple times, organizations save a great deal of processing time and, given the future changes in the regulatory environment, having everyone working from the same data is going to put institutions on a firmer ground. It doesn’t take away from the ability to think differently but instead, it delivers the freedom to innovate.

APIs create efficiency, are secure and compliant, facilitate innovation, encourage re-usability and reduce duplication. They are transforming the global financial markets.

Srikant Ganesan is head of risk and trade solutions at Risk Focus, a specialist technology solutions provider that works with organizations across the global capital markets.