Challenging Times for the Post-Trade Industry: Improving Efficiency and Achieving Stability Amidst Growing Complexity

by Arin Ray,  Anshuman Jaswal, PhD, October 21, 2015
Industry Trends
Global

Abstract

Celent has released a new report titled Challenging Times for the Post-Trade Industry: Improving Efficiency and Achieving Stability Amidst Growing Complexity. The report is authored by Senior Analyst Dr. Anshuman Jaswal and Analyst Arin Ray, both with Celent’s Securities and Investments practice.

This research is part of Celent’s ongoing coverage of the post-trade industry and was commissioned by NASDAQ OMX, while Celent kept full editorial control.

In the last few years, particularly in the aftermath of the financial crisis of 2008, the post-trade segment has been receiving much greater attention due to a number of factors, including the growing focus on market safety and stability, the explosion of asset classes, the need for harmonization and standardization, and the focus on modernization and improving efficiency.

In the report, Celent analyzes the current global, regional, and local trends impacting the central counterparties (CCPs) and central securities depositories (CSDs), and discusses how the key players are gearing up to combat challenges and position themselves for the future.

Celent identified 12 key markets across the globe for this analysis, including the US, the UK, Germany, Czech Republic, Japan, Australia, Hong Kong, China, India, Brazil, Mexico, and Chile. Celent dives deep and analyzes local trends by discussing country-specific issues for each of the 12 countries under consideration.

The regulatory environment is the dominant force impacting post-trade industry players, as regulators have heightened their focus on managing systemic risk and ensuring market safety and stability in the aftermath of the financial crisis. Added to these are market infrastructure initiatives, such as Europe’s Target2-Securities (T2S), shortening of settlement cycles, and CPMI-IOSCO’s FPMI guidelines.

“At times there is a lack of clarity and coordination among regulators in different jurisdictions. This results in lack of synchronization and standardization of some of the regulations, making the task of responding to the changes more difficult,” says Ray.

To implement these changes, CCPs and CSDs need to carefully consider their technology investments and sourcing strategies.

“We expect large post-trade service providers to continue to undertake a significant proportion of in-house technology development,” says Jaswal. “However, the relevance of third party systems is rising, as they allow CCPs and CSDs to meet their IT requirements quicker and often much cheaper. In particular, tier 2 and tier 3 players who lack the wherewithal to build in-house capabilities are finding this a worthy proposition.”

The report begins with a discussion on the current state of the global post-trade industry, analyzing organizational structures, ownership, products, and service offerings. It then discusses the challenges faced by the players at a global and regional level and plans to counter and adapt to the changes.

A separate chapter discusses the approach to technology and its sourcing strategy by industry participants and how it is likely to evolve. The report concludes with Celent’s views about the future of the post-trade industry.

The report is also available from Nasdaq.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

Executive Summary

1

Introduction

3

 

Rapid Evolution of Trading

3

 

Growing Importance of Clearing and Settlement

3

 

About this Research

4

Global Post-Trade Landscape

5

 

Market Participants in the Post-Trade Industry

6

 

Ownership Pattern of CCPs and CSDs

7

 

Products and Services Offered by CCPs and CSDs

9

 

Cross-Border Links

13

Challenges Impacting the Post-Trade Industry

15

 

Complex Evolution of Regulatory Environment

16

 

Business Challenges Adding to Regulatory Pressure

17

 

Competition to Intensify in the Post-Trade Industry

18

 

Legacy Technology a Hurdle for Operational Efficiency

19

Response from Market Players and Emerging Strategies

22

 

Business Initiatives

23

 

Operational and Technology Initiatives

25

Technology Practices Among CCPs and CSDs

29

 

Current Trends in Sourcing of Technology

30

 

Spending on Technology

31

 

Technology Capabilities Important for Future Success

32

National Market Analysis

34

 

North America

34

 

Europe

36

 

Asia

41

 

Latin America

50

Conclusion

55

Acronym Glossary

57

Leveraging Celent’s Expertise

59

 

Support for Financial Institutions

59

 

Support for Vendors

59

Related Celent Research

60

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