Web services is perhaps the only technology concept
that has gathered lots of attention in recent times.
With lots of promises, Web services claims to change
the way business is conducted today. Though the evolving
integration concept has gathered so much of hype, the
financial services sector seems to be slower in adopting
the new technology.
the financial services sector - especially the capital
markets firms - have not yet welcomed Web services,
there are speculations that firms are experimenting
with the new technology to ease up their integration,
both internal and external. In a recent report, Jim
Adamczyk, an associate with Accenture''s Financial Group,
said: "Companies are definitely looking at Web
services as a standard and a tool inside the corporate
a top research and advisory firm on the global financial
services industry, reports that by 2005, Web services
will still represent only $8 billion of the $350 billion
spent on IT by financial services institutions worldwide.
Though interest and spending on the new integration
concept will continue to grow, the TowerGroup projects
that the vision of the "networked financial services
institutions" will not be realised until the end
of this decade, at the earliest.
surfacing of the new platform - independent, flexible
technology - holds some positive signs for the capital
markets to serve as a better choice of integration concept
with more advantages than the existing practices. Web
services will make it possible for a customer to access
mutual funds, mortgages and any other related products
of a bank through a single interface and all in a single
session, which will definitely save his time and energy.
''connecting medium'' and its promises
Integration has always held top priority in the global
capital markets scenario and these firms have been known
to implement almost every known middleware exchange
technology that has been evolved since the fifties.
The rudimentary inter-enterprise integration means that
were in vogue were handwritten blotter tickets, individual
spreadsheets, faxes and other stovepipe systems.
Web services has garnered support in this sector as
it enables, "dissemination of fast information"
which is indeed the backbone of the capital markets.
Thus, the new integration concept:
a recent report, Dushyant Shahrawat, senior analyst, TowerGroup,
said the brokerage firms have the most to gain from implementing
Web services. According to him, Web services can break
down monolithic applications into software components,
thus driving down integration costs. The buy-side institutions,
which were forced to purchase integrated portfolio management,
compliance, trading and order-management platforms can
swap out components rather than rip out the entire system.
Web services can decouple these four products sitting
on the same system. Moreover, if the buy-side wants to
replace the fixed-income functionality with an order management
system, they can buy the best-of-breed solution from multiple
vendors and install it with their proprietary-application
suite, which was an impossible task in the past.
take a short journey through XML and simple object access
protocol (SOAP) because the Web services concept is incomplete
without these two components.
Extensive mark-up language - the perfect healer
XML, the founding technology behind Web services, has
been enthusiastically welcomed by the financial services
sector. According to ZapThink, an XML-focused industry
analyst, the pressures of integrating complex, disparate
systems, straight-through processing (STP) and trade-plus-one
day (T+1) settlement are making XML adoption a reality.
The group predicts that the expenditures on XML technologies
by the financial services sector will grow to $8.3 billion
by 2005 from $985 million in 2002.
XML-based solutions seem to reshape the future capital
markets arena because they:
a means to internal integration of feeds from various
data integration and consolidation, thus allowing creation
of hubs for risk, trade and customer information.
the creation of architectures, which can be easily complimented
dependency of firms on single legacy systems, and give
the opportunity to make the right choice from multiple
the purchaser to evaluate complex trade practices without
the pain of reformatting, thereby improving market efficiency.
electronic clearing, bidding goodbye to manual paper
in describing the non-static nature of traded products.
is no doubt that XML will bring about tremendous changes
in the whole business process from pre-trading to post-trading,
and participants and vendors have almost guaranteed
that XML will be the next technology stopover for capital
markets in the future.
- still miles to go
Simple Object Access Protocol or SOAP is a simple, lightweight
protocol for exchanging XML information over the Internet
to invoke Web services across a network.
matter how many disparate systems, Web services or applications
the data travels across, the technology is designed
in such a way that the receiver will be able to clearly
read the data as it was originally sent - in a nice,
research reports that SOAP''s XML messages are not suitable
for transferring bulk data. So, the use of SOAP standards
will definitely affect the capital markets, which deals
with huge amounts of data for communications. The standard
is criticised for being inefficient, as you need to
send more data to communicate than the existing techniques.
of security measures in SOAP is compelling enterprises
to restrict their Web services experimentation to smaller
projects rather than pilot projects.
- the next revolution
Though the deadline for STP and T+1 settlement is three
years away (2005), the financial services and securities
companies are gearing up for the big automation move,
as it will help them to discard redundant manual processes
from pre-trading to final settlement.
the leading solution for enterprise integration, Web
services plays a very significant role for financial
services firms to deliver STP. In a recent BEA survey
of the top 100 US-based financial institutions, 85 per
cent of respondents said that Web services would play
a role in STP within the next two years.
Oberest, vice-president of financial services at webMethods,
said in a report that Web services would help companies
to leapfrog into the next generation of STP, where customers
can access firm''s services automatically. For example,
Web services will enable a large bank embed a brokerage
firm''s trading system into its own banking applications,
services have capabilities to help out innumerable financial
institutions like the hedge funds, to seamlessly integrate
their own legacy systems with the best product from
multiple vendors. The result is an industry-wide STP
that gives the opportunity to even the smallest buyers
for real-time connectivity to core services and utilities.
viable option or an impractical wave?
Currently, there are no laid-out standards for electronic
communications of security identifiers, orders, quote
requests and allocation instructions. Web services may
turn out to be a saviour for the industry. But, security
and reliability are the main concerns behind practical
implementation of Web services in the securities industry
that is highly risk-prone.
a report, Gwen Alexander Moertel, IT director for Wachovia
Securities Inc''s equity capital markets division, is
of the opinion that her company has no plans to use
Web services for mission-critical applications such
as trading due to security reasons. She also said she
is never going to use Web services to send instructions
for her million-dollar trades.
A TowerGroup report predicts that most securities firms
would remain suspicious of Web services until mid-2003,
when the technology will begin to mature and prove itself
in certain areas. But, the report also forecasts that
the technology may be dismissed by people in 2003, and
then picked up again in 2004 and 2005.
security and reliability, Web services have all the
potential to serve as the most viable, inexpensive,
economic alternative for service delivery and STP mechanism.
With promises to cut down business application integration
costs, to unite disparate business applications regardless
of their platforms to bring better business returns,
Web services has created a lot of hype all around the
its adoption has not been substantial in the financial
services sector, it is difficult to assess its impact
at this point of time. It could be that only after three-to-four
years that people would be able to witness whether Web
services has really kept its promises.