The video can be viewed on ZeroFive whilst the full interview is also available below. Below that is a transcript of what Jonathan had to share.
Reece Chapman: Welcome to another episode of ZeroFive. Today, I’m joined by Jonathan Morris, Global Head of Listed Derivatives at Goldman Sachs. Thank you for joining us today Jonathan. If you’d like to just take a quick moment to introduce who you are and your background in the financial sector.
Jonathan Morris: My name’s Jonathan Morris, I am the Global Head of Listed Derivates at Goldman Sachs. I’ve been with the firm for 16 years. My background has been in several roles within the listed derivatives operations area. I also have experience in the OTC equity derivative space, client onboarding and various other roles within operations.
Reece Chapman: First up, what do you think is driving change in post-trade processing today?
Jonathan Morris: So I think broadly speaking, there’s a huge focus on service, client service, and in order to achieve optimal client service, it’s important that from a post-trade perspective, you have accurate books and records, accurate client money lockup. Ultimately, good service to our client base. In order to achieve that, I think post-trade is critical and is becoming more and more crucial and transparent to clients just in terms of how things are accurately settled.
The reporting that we are able to get real-time via portals and the technology that’s now available. So I think that coupled with a need to, you know reduce costs, be efficient etc., they’re really the focal points for the focus on post-trade right now.
Reece Chapman: Interesting. Do you foresee any specific type or types of technology having the biggest impact on the post-trade space?
Jonathan Morris: So with a background in reconciliations within listed derivatives and many years spent in that space, for me, I think, the reconciliation of infrastructure is a pretty crucial part of the broader infrastructure surrounding listed derivatives as a product. If you get the reconciliation right, you’re able to not only, achieve your objectives from a service perspective, but moreover, you’re also able to then understand the root causes of the issues upstream. So I think that’s a really good place to start and having better technology that’s able to pinpoint more precisely the root cause issues, you can collectively as an industry, then work together to address some of those broader issues around the standardization.
We’re definitely starting to see some of that come together through, you know, collaboration across the industry under the FIA’s leadership. But there’s a lot of work to do to enable us to consistently approach and tackle those issues and ultimately resolve them head-on. That collaboration is great, but it takes time to achieve some of those longer-term solutions. So if you then, in isolation, look at each firm, as having a good reconciliation platform that can address the kind of issues that are in-house, so to speak, I think each firm can then incrementally improve their offering through that.
Reece Chapman: The next question is something, I’m sure you’ve discussed many times, that being AI, what effect are you anticipating it to have?
Jonathan Morris: I think we’re still in the early days of AI and I don’t yet see that we’ve got good use cases that have been proven out yet. There are definitely some use cases that we’d love to put forward and see what tooling can do. But I think we’ve yet to see an example of where it’s been well utilised and solve problems for us as an industry. The technology has definitely got value to add without a doubt, it ties back to the point I made around the reconciliation root causes.
Right now we rely on good quality data over time telling us a story. Then the SME’s going in and understanding that and helping refine it and tell us what needs to get done to address it. But longer term you’d hope that as things evolve, whether it’s regulation or otherwise, you know you can’t consistently have to rely on SMEs, that will change naturally over time. So to tell those stories you want the artificial intelligence to come in and say we can you know understand these patterns and tell you what’s happening in an automated fashion.
Reece Chapman: Taking a quick step backwards, what do you still see as the major challenges that will need to be overcome?
Jonathan Morris: I think the biggest challenge we face is still, the inconsistencies across the different firms and components of the ecosystem within listed derivatives. It’s pretty unique in the number of component parts that make up the ecosystem that we commonly referred to. And in order for that to work optimally, it’s really important that people collaborate, work together and solve these problems as a collective.
We’re definitely making some inroads through some of the FIA-led initiatives that we’ve previously discussed. However that’s going to take time and there needs to be a clear roadmap out there of, what we looking to achieve, maybe breaking it down into bite-size chunks of things that are actually achievable within certain timeframes. And I think we have to hold ourselves to account as an industry to ensure that we do achieve those objectives before we move on to the next one. Because we’re at risk of biting off more than we can chew. We’ve all got these aspirations of making it standardized, the product is standardized by definition.
The industry still has some way to go to get to that point. I still think that is the biggest headwind that we face. I would also add to that, that the other one is the unknown quantity of regulation and just the geopolitical environment. Without a doubt, the volumes that we’ve seen in the past couple of years, the exponential growth, the product diversification, all of these things coupled with the regulation I mentioned, present us with challenges outside of the initial objectives that you set. So we need to be nimble. We can’t just sit there and say we’re going to do this and not do anything else. There’s always be some competing demand, things that we can’t predict for, and it’s about how we navigate that as an industry collectively. That I think it’s really going to help us move the needle on some of these objectives.
Reece Chapman: Finally to end off, what do you see the impact of digital asset classes being?
Jonathan Morris: So I think there are two points. One would be the underlying blockchain technology itself and how that can be utilized across our industry to effectively disrupt what happens today. If you look at the ecosystem where you’ve got the different participants, clearing members, CCPs, exchanges, clients and so on and so forth. I think blockchain technology has a real opportunity to disrupt the way that things operate today.
That said, I think it’s a long way away from, you know, being completed and achieving its end-state objective. So a lot of work to be done there, but it definitely has some promise, in my opinion. Beyond that, I think there is clearly an immediate focus on the digital asset class in terms of what’s being traded today, the derivatives that are therefore being created on the back of those underliers. That offers us an opportunity to grow our business, and offer different types of products to customers. I think that’s only going to become more and more prevalent and interesting over time.
Reece Chapman: Thank you for taking the time to meet with us today, Jonathan, and thank you all for watching. We will see you again next time.