Gary Dedilectis, TCS Financial Solutions

Over the last 25 years, investment banks and broker/dealers have been challenged with replacing monolithic, legacy, back office systems. Coinciding, are the slashed budgets attributed toward upgrading and enhancing these systems. This includes keeping up with the ever changing regulatory landscape. Due to the struggle of keeping their stock prices relevant, investment banks and brokerage firms cannot attribute budget dollars to back-office legacy systems. They must spend on more relevant systems such as trading, research and risk which provide more profitability.

Additionally, programmers and developers versed in COBOL, Assembler, RPG, among others, are a dying breed and cannot be sourced any longer. This, and the fact that millions of lines of programming code needs to be changed and retro fitted for one simple enhancement adds to the complexity and costs associated with maintaining these systems.

In addition to all the Investment banking, back office, proprietary systems, and third-party vendors also face challenges to stay afloat. Although, they may make changes that affect multiple clients, they sometimes have different securities product offerings on different systems that have different programming languages that require different skill sets. These systems sometimes do not talk to each other and have to be consolidated into a universal stock record which is required by the regulators. What the investment banks, broker/dealers and third-party vendors have done is to create workarounds in newer programming languages such as JAVA to expedite these changes.

What this has done is create dis-jointed operating systems that are suspect to break downs and passing data back and forth, leading to unreliable data and tremendous exception handling. This results in costly errors, additional head count, regulatory violations and reputational losses. This is a likened to a building being constructed on a bad foundation with non-permitted additions that are cracking and ready to collapse.

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