Amid data led business innovation agenda dominating capital markets, financial market infrastructure (FMI) firms remain exploring strategies to transform their traditional business avatar – a standalone industry utility hosting parts of trade processing. Led by the ideas of an open and assimilative business model thriving on ecosystem harnessed capabilities, they strive to exploit innovation opportunities in wider contexts of the investment value chains. Popularly reckoned as Marketplace, the paradigm enables FMIs to innovate their products, processes, and underlying platforms for shifting the demand curves in a volatile business environment.

Construct of ecosystem-aligned Marketplace

The foundational contours of ‘Marketplace’ focus on re-calibration of FMIs’ existing monolithic processing chain focused services into a set of inter-connected ecosystem-aligned services. Enhancing business sustainability and resilience, following core principles  guide the business model and operating structure of an FMI led Marketplace:

• Re-inventing new core: Unraveling internal value and reframing core capabilities to develop newer competencies and non-liner value propositions relevant to the context of ecosystem play.
• Assimilation and cocreation based services: Seamless integration of partners’ services and cocreated offerings in adjacent layers of the investment value chain to develop new revenue streams.
• Ecosystem aligned platform orchestration: Ability to orchestrate client-centric value chains enabling plug-n-play solutions, tools, and white labelled service packages from partners.
• Multi-network bridging: Connecting value chains, service providers and platforms to enrich capabilities and service portfolio aligning with evolving business models.

Cloud emerging as catalyst for innovation

Anchoring digital strategies to realize business growth and transformation, Cloud adoption has witnessed a phenomenal growth across industries in post-pandemic years. Cloud is no longer being looked through a narrow prism of IT infrastructure scaling and flexibility of platform technologies alone. The evolution of Cloud platforms has shifted its early focus on IaaS and PaaS scaling to broader hyperconnected platforms - fueling technology driven business innovation. Cloud emerging as the foundational pillar for data-intensive computing – i.e., advanced analytics, data science, artificial intelligence (AI) as well as its evolving incarnation of Generative AI, it emerges as an efficient enabler to garner augmented business capabilities from the ecosystem and harnessing cross-functional innovations. The findings from a global cloud study conducted by a leading IT services provider in 2023 highlighted that every third respondents out of five respondents consider cloud crucial to their organization’s future as a catalyst for innovation.

Industry Cloud platform propelling the idea of Marketplace

With wider adoption of Cloud services, hyperscalers have started tuning their domain-agnostic cloud platforms to meet the focused needs of specific industry segments. The emergence of Industry cloud platform construct opens new possibilities of innovation attuned to core business processes in financial services domains. Unbundled services, turnkey solutions, and tools from partners – i.e., software vendors, SaaS providers, fintech, data vendors, system integrators - bring a wide range of subscription options and pricing models. Leveraging composable architecture, industry cloud platform offers a rich catalogue of curated business solutions and service packages, while ensuring functional focus and modularity.

In recent years, strategic partnerships between hyperscalers and FMIs as well as capital markets players and data vendors signify the growing expanse of Cloud based Marketplace construct. The spate of acquisitions and collaborative ventures by FMIs to augment their technology solutions and advanced analytics offerings across investment management lifecycle further proliferates the Marketplace idea. With deep commitment to emerge as the Cloud-based super-utility in investment ecosystem, FMIs’ Marketplace journey advances in earnest in AI-powered business ecosystem.

Elevating the Marketplace gameplan: Opportunity areas for FMIs

Being at the forefront of charting data-led innovation agenda in capital markets, FMIs need to build newer capabilities for addressing needs of niche businesses in spheres of proximity. Expansion and augmentation of service portfolio aligning with emerging themes in larger investment ecosystem becomes a critical necessity. It requires the creation of multi-markets, multi-assets, and multi-products nuanced offerings, catering to needs of segments of buy-side firms and market intermediaries.

Creating new capabilities for non-standard assets, the Marketplace anchors standardized workflows, analytics tools, and solutions across investment research, pre-trade post-trade, and asset-servicing functions. Non-conventional data for investment decisions, operation, risk, and compliance insights emerges as another opportunity area.

Key themes and opportunity areas in FMI led Marketplace:

• Private Equity and structured products: Deal sourcing, due diligence and deal-life cycle workflows, portfolio financing, return and performance analytics, liquidity, and tax insights.
• Real-estate: Customized solutions for investment management, inventory and demand analysis, portfolio return, performance, valuation, risk, taxability insights and benchmarks.
• ESG:  Sustainability themed capital issuance, market liquidity and pricing, benchmarking, investment research, portfolio risk management tools, performance analysis and disclosures.
• Carbon trading: Trading tools for voluntary and compliance carbon markets, issuance, pricing, allowances & offsets demand-supply insights, and energy markets corelated analytics
• Emerging markets: Standardized access to investment products along with investment servicing to fulfill local market practices and regulatory requirements.
• Digital assets: Solutions and self-discovery tools for digital and tokenized assets across issuance, trading, settlement, custody, and financing.

What is next?

Industry cloud as the foundational base of the Marketplace, FMIs can aggressively embark on expanding value chain services in newer domains of investment ecosystems. Elevating their data-play from lower trajectory of reference and market data, realization of data product and monetization strategy becomes a critical first step. Apart from unraveling the value from their huge unexplored data repository, it opens new vistas of ecosystem partnered offerings - blending data-led inventive values embedded in value chain services.

To capitalize on the opportunities from Marketplace model, FMIs need to adopt a futuristic avatar with multi-segmented platform capabilities. With contextualized data products at the centre, a spectrum of cocreated formulations across intelligent process capabilities, decisioning insights and analytics blended services can be a real game changer in catering their customers’ needs. Equipped with unmatched product leadership and innovation credentials, FMIs can gain a distinct competitive advantage from their newly acquired ecosystem influence in emerging realms of capital markets.