Platforms, outsourcing, tech risks and the regulator

With the value of assets placed on UK wealth and investment platforms increasing, it is more important than ever that the technology underpinning those platforms is resilient and able to serve investors in a reliable and secure way.

City regulator the Financial Conduct Authority (FCA) “is set to look at platforms’ technology systems later this year”, Money Marketing reported in January.
With the regulator due to outline the areas of risk it will focus its attention on in the coming year before the end of this month, we take a look at what some platforms in the market are doing to preserve the continuity and integrity of their services and what their obligations are under financial services rules.
A case study in tech change
Last year, the Edinburgh-based investment platform Nucleus implemented a major upgrade of the technology powering its platform. Andrew Smith, chief technology officer at Nucleus, told Out-Law.com that the new software it sourced from technology provider Bravura is pioneering, will help the company “scale effectively”, and could still be used by Nucleus 10 to 15 years from now. He said Nucleus is confident the platform will not fall down under pressure of increased use.
“With the majority of assets on the platform held in model portfolios, the number of transactions and re-balancing being carried out on a daily basis had steadily increased over time,” Smith said. “We identified the need for the platform to be able to continue to scale over the longer term to accommodate this substantial increase in assets, clients and trading numbers.”
“We’re secure in the knowledge that we can grow and develop the platform now, knowing it can scale easily and with minimum overheads. Most importantly, our platform can now deal with an improved number of transactions as it is able to support a substantially heavier load which allows us to get on with growing the business unhampered,” he said.
Smith said that Nucleus had “carried out a rigorous performance test” of its system before going ‘live’ with its software upgrade last June and that it is planning a further “full performance test” later this year. Other measures are in place to ensure the resilience of Nucleus’ platform too, he said.

“Our on-site business analysts monitor system performance regularly and very closely to ensure that where we identify a certain scenario which could be a concern, such as a degradation, we can act quickly to rectify it,” Smith said.
“A strict business continuity plan is carried out every six months. We have exactly the same platform kit replicatedon dedicated servers on a secondary site with a real-time link and we can switch our operating systems between here and our secondary site in less than 20 minutes. Our servers here and off-site offer full flexibility and if we need to switch over just a part of our server to the secondary site to ensure the platform is fully supported 24/7, then we can easily do so,” he said.

Nucleus is also prepared for a total systems failure, he said.
“If we did have a catastrophic failure with our main server, we would switch to the secondary site, the worst case scenario being the loss of only 20 minutes-worth of trading data. At the same time, we would instigate a full communications exercise to ensure that all users were kept fully informed and all trades would, of course, be rectified.”

Read more at: Out-Law.com-Platforms, outsourcing, tech risks and the regulator

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