Capital markets: The unequal evolution of sales and trading

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Automation stands out as one of the most critical factors in any digital transformation for the capital markets industry.


When looking at capital markets, the consensus is that the industry lags relative to other financial services sectors around innovative transformation.

Our view is different. We’d argue that the evolution is just uneven. The use of predictive analytics to proactively automate straight-through processing, or artificial intelligence in real-time trade execution, is happening. It’s just taking place for select asset classes and with a small group of industry participants.   

This unequal evolution is all but certain to change. The growth in bond exchange traded funds (ETFs), for example, is starting to catch up with the shift seen in equities many years ago. This will eventually lead to more active secondary markets, narrower spreads, and more transparent pricing—all critical ingredients for product digitization and broad automation with low- to no-touch trading.

In our experience, automation stands out as one of the most critical factors in any digital transformation. The standardization that comes with digitization ultimately increases volume, speed, and data growth. Without process automation, it’s almost impossible to keep up and it can be a limiting factor in becoming a truly digitally connected organization.

In a capital markets business, the challenge is keeping ahead of the Joneses.

As broader parts of the financial markets are digitized, market structure and industry participants will evolve. This prompts two strategic concerns:

  1. how to optimize the business to achieve profitability goals while addressing funding and capital constraints, and
  2. how to evolve the operating model to enable growth and meet the needs of this new environment.

Addressing these challenges requires more than product-by-product or function-by-function digitization. It requires addressing the second-order effects to fully take advantage of this new market reality.


As institutions continue to look for answers in an industry that is being reshaped by evolving regulation and technology, several key areas should be addressed in assessing future operating decisions.

Expand end-to-end capabilities

Many institutions implement process automation to control costs in line with digital-based pressures such as commission and spread contraction.

To elevate automation beyond a short-term discrete solution, new services that leverage the output of automation should be developed. Whether this is enhancing the user experience with real-time services, enabling deep integration by extending data and systems to clients, or automating decision-making by harnessing broader sets of data, automation can be a central component to improve client retention and wallet share rather than just a method of rationalizing costs.

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Create meaningful analytics to make informed client segment decisions

As broader parts of the capital markets business move toward digitization, methods of client interaction will change and prompt re-evaluation of the sales approach and how to maximize client profitability.

Many institutions lack a multi-dimensional view of the client relationship due to the traditional sell-side model structured around siloed efforts to chase revenue. Mutually beneficial client relationships are now more important not only to align the degree of “touch” with client revenue but to maximize the benefits that can be shared between a bank and its clients.

As product digitization leads to commoditization, the ability for institutions to focus limited resources toward profitable growth is the required first order response. However, the ability to turn product standardization into a competitive advantage through new product development, streamlined product access, or new distribution are the second order benefits that can help reposition a firm for sustained growth.

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Adapt supervision and controls to new risks

Operational risk management will increasingly need to consider the evolving nature of how products are delivered and by whom relative to the product itself. The core tenets of supervision will not disappear, but they need to adapt to how the underlying business is shifting.

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Contact us

Julien Courbe

Financial Services Leader, PwC US

Christopher Scarpati

Principal, PwC US

John Giannotto

Director, PwC US

Scott Levine

Director, PwC US

Eric Hu

Director, PwC US

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