Don't Ride the Waves of Standardization Blind

No doubt, without standardization we'd have no powerful interfaces that transform one world into another.

My industrial socialization, factory automation, was characterized by standardization. If you don't have standard machine elements, function complexes, mechanisms, ... you need to make everything yourself from scratch. Even languages that are understood by machine, robot, ... controls need to be standardized. Our high level task-oriented offline programming languages were compiled to standardized control code.

Even highly automated factories were individual configurations of (kind of) standard components - hard and software.

But we realized quickly: complex automated manufacturing tasks cannot be centrally superviced, they need to be organized as interplay of systems with local intelligence. The bottom-up fashion.

This is where I come from. And I am still for standardization, but I've reservations about strict supervision and  centralization.

In banking, standards consolidate transactions, rationalize accounts. integrate payment environments and what have you, but

Big regulatory wave

Regulatory bodies often use "(international) standards" to designate principles and rules of financial regulation and supervision for the general and detailed business processes in the financial sector.

After the financial crisis it seems regulation has become a synonym for centralization? It comes like a big wave and causes big changes of financial business principles, far beyond core capital rules, risk management requirements, …

It redefines game rules even in pricing.

ISO standards are voluntary

ISO standards are written international agreements on the use of technologies, methods and processes adopted to the consensus of partners concerned - support consistent technical implementation.

To me this is vital: it is suggesting an orthogonal engineering, implementation and management of technologies and solutions. Decentralized implementation does not restrict a systemic use.

Consequently, standardized platforms do not kill innovation.

Central counter party - Unintended consequences?

My view on central clearing, ....
On a higher-level view central clearing is reducing counter party exposure but may be resulting in an increase in liquidity risk. Such kind of centralization may drive a marginal cost regime with margin compression (OTC revenue reduction) ….

Technology providers, will not be able to influence the rules, but

Individualize with UnRisk

We will put our best efforts to support our small and medium-sized clients to evaluate their revenue impact and maybe refine product and sales strategies to their business strength.

Quants will become even more important as our partners. Instruments will become less complex but the valuation space will become massive. Market dynamics will change basic rates more frequently. Consequently, the methodology to price a simple swap changes fundamentally, portfolio optimization gets another meaning, …

We will soon offer the methodologies for these new regimes to be managed in our UnRisk Financial Language in combination with the UnRisk FACTORY Data Framework supporting the corresponding financial objects and data.

Designed to enable quants to build systems for better trading decisions and risk-informed sales strategies under a new (regulatory) regime.