Delivering the Power of Generative AI in Corporate Bond Trading Workflows
Interview with Broadridge President Chris Perry on CNBC Europe discussing BondGPT.
Julianna Tatelbaum - Chris Perry, president of Broadridge, joins us now to talk through the survey results and help us understand a little bit more about this BondGPT. Let me kick off with the survey results, though. 57% of firms surveyed, these financial executives, financial firms, see digital transformation as their most important strategic priority. Where specifically are firms planning to spend over the next few years?
Chris Perry - Yeah, we do this survey every year because we need to have a pulse on what's in the minds of the largest financial services institutions in the world. That's where we spend our time. It was very interesting this year to see that transformation, digital transformation, became number one. Last few years it's been cyber and infosec, which are still very prevalent in what's happening. It's exciting for the industry to start to move past those things and deliver more value, and that was really present in the survey results.
Julianna Tatelbaum - When I think about the big European financial institutions, the big sell side institutions, these are behemoths which are often very complicated. They're pieced together from lots of different banks that have been put together over the years, and they're pretty behind in some ways, digitally speaking. How are those institutions going to compete when it comes to newer technology if they're still trying to catch up and modernize their simple systems or operations?
Chris Perry - Yeah, there's a big wake up call. Right now you have disruptors that are coming in. They're nimble. They have capitalization, particularly from a few years ago when a lot of capital was driven. The large institutions are really waking up, which is, again, why 57%, which is the highest it's ever been, believe modernization and transformation is critical. And the way it's working today is the modernized technologies, AI being the thing that really jumped out. And also, particularly in Europe, there is a commitment to blockchain as the technology of the future, a bit more so than in North America, which is surprising. There is a big difference, though, between AI and blockchain. Blockchain is an underlying technology that will enable AI is a complete transformation, which is why we launched this BondGPT program.
Joumanna Bercetche - Yeah, so a lot of things I want to follow up on. But first of all, let me just start off by asking you, given the focus on digital transformation now, that obviously is going to coincide with a lot more spending on these types of technologies. How soon or how long is it going to take for these companies to extract financial value from all the investments that they're putting in?
Chris Perry - Yeah, it is the tricky part because the biggest obstacle is budget. The second biggest obstacle, by the way, is staff believing in in what is about to hopefully happen. I really believe institutions partnering with the right organization like a BroadRidge, can get dividends pretty quickly. What is digital transformation? It is changing the client experience, improving revenue retention, driving growth and of course reducing costs. The cost reduction can be invested right back in digital transformation. So it does take some time, but you have to commit to it and start somewhere.
Joumanna Bercetche - But oftentimes these digital transformation isn't just about incorporating the new technology, it's about bringing in all of the ancillary tasks that you need around it. And one of them is going to be compliance. So how big of an issue is it going to be to make sure that all of the technologies that are onboarded are operating in a way that is compliant with the regulators?
Chris Perry - Yeah, well, it's interesting. When I started my career, compliance was an afterthought. Now it's a forethought. So anything that's being built now in the talk track compliance comes right out upfront and again, investing in solving for compliance while transforming, that's a double victory.
Julianna Tatelbaum - Talk to us about BondGPT. Joumanna comes from the bond world and I'm sure is curious how this works. How does it fit into the way you know, traders interact and how easy is it to build a tool like this based on ChatGPT-4?
Chris Perry - Well, Joumanna you would have liked the ability to have a natural query language where you could just ask about bonds that are inverting or their debt rating and the inversion has taken place. That's the nature of this. What we have the ability to do is a natural query to look for liquidity. And we've built a platform that scores bonds based on their accessibility to liquidity. So you you can you can now use this natural language generative communication where you can query all these databases. Now, how easy is it to do? Well, you know, the basic query is easy, but it's really the underlying data cleanliness and the way in which you can bring multiple different datasets together. And lastly, what's the beautiful thing about generative AI is how fast it can respond. Yeah, it's like having the smartest person next to you at all times.
Joumanna Bercetche - Yeah, I mean, a couple of things spring to mind. Just putting on my my bond hat. I think with the with the more liquid securities, it becomes easier because there's a lot of transparency in the market. But the less liquid they are, the more you go down the credit curve. It's going to be more challenging for for for, as you say, to ensure that that data is clean simply because you have so many different perhaps some in some cases unreliable sources of where the bond prices are coming from.
Chris Perry - This comment is fantastic. Because LTX was built for the off the run bonds basically. Basically, there's a lot of trapped bonds that don't trade. Yeah. The on the runs trade very actively and very digitally but there's a whole lot of bond liquidity that a portfolio manager wants to access. So this tool does that.
Joumanna Bercetche - Yeah yeah. Interesting. And then my second point is, back in my trading days, we'd actually have traders who would provide me with that information. We had actual people who would sit down on their Excel sheets and mine through all the data and put it all together. I'd say to them, you know, how's this one looking all around? They've come back to me 2 hours later with the sheets. What's going to happen to those jobs?
Chris Perry - Well, my message to everyone is up your game. Because what we can now do is we can query with A.I. to get the things we might have had a junior analyst or an analyst do. And now we can do that instantaneously. So what we need to do is be smarter about what we do with the information and those people that are in those those those roles. They'll find the path to do that. We have to help them there and not be scared of the technology. A lot of people are scared of AI and there are some reasons that we need some guardrails and boundaries. But the reality is if we don't embrace it fully, it'll be in the hands of the nefarious people who will be using it against us. And I think the dynamic for talent is to up your game.
Julianna Tatelbaum - What about on the buy side? I mean, that's the sell side. The people who are putting together the information about these bonds. But what about, you know, active asset managers? What does the future look like for them? They're already using these A.I. tools to a pretty strong degree for all the grunt work.
Chris Perry - Yeah, well, Broadridge is actually a really important bridge between the buy side and the sell side. We really serve the sell side, but we want to enable access to liquidity for the buy side. And LTX is really about scoring the bonds that are most liquid. So the buy side can understand can they affect this trading strategy and then they can go to the sell side for liquidity. AI is going to be omnipresent in things. It's it's not just hype, although it's not as far along in the use cases as people would like to think it is. But it's going to accelerate very, very quickly because.
Joumanna Bercetche - It makes you think about the future of of trading, because back in the day you had these macro superstars, the big hedge fund, the macro investors, and a lot of that was sometimes just based on a gut feel. Their gut feel was that Dollar yen was going to move higher, Treasury rates were going to move lower. And I just wonder, with the advent of these super smart machines and machine learning with artificial intelligence, whether those veterans of the industry will find that it's time for them to move on because the machines.
Chris Perry - I hope not, I mean, I do believe that your gut instincts, your anecdotal knowledge, complementing real data that is query through AI is going to be way more powerful. I think it's going to make people smarter using it the right way.
Joumanna Bercetche - Yeah. Yeah. So less opportunities for arbitrage. All right. We could continue talking about this forever. Chris, thank you very much for joining us today. Chris Perry, president of Broadridge.