JPMorgan’s Worldwide Securities Services division is following a strategy of partnership with technology developers and suppliers to leverage their expertise and play an integrative role. Chief technology officer John Galante talks to Dan Barnes about third-party provision.
John Galante, chief technology officer at JPMorgan’s Worldwide Securities Services division, does not expect any surprises to come out of Sibos this year. His view is that SWIFT will stick to its strategy fairly solidly.
“I don’t think there’s any shocking news. They’ll try to extend their services to a larger audience of customers; they’ll extend their reach, at the same time expanding their baseline with more message types, more capability to enable automation,” he says.
The technologies that improve these capabilities have not yet been fully exploited, he says, and they are only the tip of the iceberg where reducing manual intervention and reduction of processing rates is concerned. The motivators for automating the back office are disparate (see Trading Systems supplement) but Mr Galante recognises the potential that flexible messaging, MQ (message queue) messaging and real-time messaging offer as being fundamental to moving the industry forward.
“From a core processing point of view, messaging and flexible data translation will enable us to do a lot more in terms of processing across multiple disciplines,” he says.
Technology exploitation
The exploitation of portal and IP technologies is also yet to be developed, although there are still some basics for the industry to take care of before it can make best use of them. “If you don’t have your underlying fundamental data right, no technology is going to make a difference,” Mr Galante warns. “Getting the data right and having good sourcing of data, good processing of data and good representation of data makes all the difference in the world.”
Mr Galante is keen on working with vendors to make the most of such new technologies. That does not mean that they should relax. Like many banks, JPMorgan is happy to build its own kit when necessary and this trend could reduce the number of possible customers if the IT suppliers do not keep up with matching their product to the requirements of the banks. To avoid this requires proactive alliance building from the vendors, keeping ‘high-touch’ relationships active with their market.
“Where there’s a mature space with a number of vendors present, I would look to partner and use them and leverage them. I see our role as being technology integrators as much as technology developers,” he says. “I think the smart [suppliers] will be looking to partner, the ones that resist or try to increase fees, as customer numbers reduce, without changing the service, I think they will lose out in the end.”
Third-party provision
The maturity of the securities IT market has led Mr Galante to become more comfortable with third-party provision and he believes that standard software should be seen for what it is. He shows no fondness for customised development. “If they provide me with a package that has certain functions, the challenge that we both have is how to leverage what they are doing for me as well as others – to really try to stay with their core product set, integrate that and build around that with my own stuff,” he says.
As a provider of outsourced services, Mr Galante has some sympathy for the suppliers’ position. As far as trades processing, clearance and settlement, and asset servicing go, he believes that JPMorgan is the place to look to for real expertise. In offering outsourced middle-office operations, his function must understand the customer mindset – where their strengths are and where they should look elsewhere.
“[Our clients] say ‘we’re really in the investment management business, so we can’t build the scale and expertise that a JPMorgan can build’. We see it as a business opportunity because it is a steady growth area for us, in terms of moving up the curve, in terms of functionality and leveraging a lot of our existing technology and people,” he says. “They are not looking to build the best straight-through processing corporate actions engine in the world. We are. That’s where an alliance or an outsourcing arrangement works.”
Customer requirements
To continue to grow, the technology group in Worldwide Securities Services will be addressing its customers’ appetite for more complex products within the bank’s core systems while producing the necessary front-end technology to facilitate access. “That applies to both sides of our business: the investor side where we’re managing their portfolios as well as the trust side where we’re working with the issuers and the issuer providers to enable a derivatives product,” says Mr Galante.
Matching customer needs is a continual process and Mr Galante holds regular reviews – on either a monthly or quarterly basis – to ensure that the requirements of service level agreements are being met and to see where the bank can assist with the client’s problems and projects.
He gives the example of the bank’s latest reporting system. “We are currently focussed on providing our accounting clients with a reporting system and will be introducing it to our custody and securities lending clients over the course of the next two months as well.
“That system basically enables our clients to get all of their data in a reporting package scheduled as they need it, as well as enabling them to dynamically create their own reporting so we refer to it as ‘Any View Any Time’.”
Exceeding expectations
Internally, the IT function must also ensure that it is meeting and exceeding expectations. The bank’s services are broken out into clearance, securities, trust and securities lending within Worldwide Securities Services. A model has been developed, originally in JPMorgan and later clarified with the Bank One merger, to ensure that IT is well linked to the groups. A product leader sits within each of these product ‘families’ as part of the management team as well as the technology management team.
Mr Galante says that he is also tied in to this model. “I sit at [head of JPMorgan Worldwide Securities Services] Mike Clark’s table, where he manages worldwide securities business and I sit at [CIO of treasury and securities services] Mo Osborne’s table where she is managing technology for the business. I think it works very effectively.”
The crucial part of this is balance, not skewing the focus too far on to the business or pure technology plays, he says.
Fresh talent for the future
To keep his function’s future secure, Mr Galante is investing in and growing fresh talent. With primary campuses in New York/Brooklyn and Dallas for the US, and London and Bournemouth for the UK, he has instigated a training programme that reaches out to relevant departments at local universities to build a “nucleus and feeding ground” for the bank’s technology function.
“We have approximately 17 interns in Dallas, a dozen in Bournemouth and we’re just starting in New York with around 10 interns. In total, we should have somewhere in the neighbourhood of 35-50 interns on a continuous basis that will provide us with some good seeds for the future,” says Mr Galante.
“In multiple levels within the organisation, we have people with very good business and technology backgrounds. We have some great people in that space and I just think that we have to continuously rebuild it.”
