State Street Corporation has made a big bet on big data, relative to many of its peers. Yet its colossal effort to revamp every system it has built over decades suggests how difficult it may be for the investment industry to take advantage of cognitive computing, machine learning, and other technologies.
As part of overhauling its legacy systems, for example, State Street is using blockchain and open source technologies.
“The by-product of being the custodian and accountant is that we sit in the center of critical data,” says Ron O’Hanley, president and chief operating officer of State Street Corp., which includes the data and analytics business. “We’re all awash in data, just look what you can get on your phone. But it’s how we enable our clients to use their data and other data in a useable form.”
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Moiz Kohari, State Street’s chief technology architect and previously head of technology innovation at London Stock Exchange, says he’s going down this expensive path because the firm — its asset management arm included — needs all its data in one place if it hopes to find anything valuable in the information it processes daily. Like most financial institutions, State Street has multiple databases scattered throughout multiple interconnected systems.
“We have $33 trillion in custody — a big part of the world’s wealth — and $3 trillion of managed assets. The data that underlies this asset movement is incredibly valuable,” Kohari says. But, “It’s almost impossible to run the analytical jobs you want to run to get intelligence now.”
First, the bank is tagging every piece of client data down to the most granular level. State Street can then integrate clients’ private data with public sources of information, such as social media feeds. As events like Brexit move through the global economy, they may affect the prices of commodities, the subsequent speed of getting parts from suppliers to manufacturers, and ultimately the delivery of finished products. State Street wants to reflect in real time the wholistic impact of these events on clients. It aims to feed constantly updated information back into investment processes, like a manager’s daily trade lists.
As a trust bank, State Street is using a permissioned ledger, a private blockchain. Kohari says Bitcoin has proven the value of features like real-time peer-to-peer asset movements, which eliminate the risk involved in waiting for transactions to settle. State Street is now finalizing a securities lending application of the technology.
“The game changer occurs when you transform your internal systems first. Otherwise you’re just going back and forth, on and off the chain,” Kohari says.
State Street is also using open source and open platform technologies, including hardware, to access commonly used sub-systems like messaging applications that were once only available from vendors. Kohari says the sub-systems are components that can be assembled in the arrangement he wants. The firm is essentially building its own architecture on top of a well-tested open platform.