Dodd-Frank and EMIR Derivatives Reforms: Future Scenarios and the Impact on Derivatives Technology

by Anshuman Jaswal, PhD,  Cubillas Ding,  David Easthope, October 27, 2011
Industry Trends
EMEA, North America


Celent examines the evolving market structure for OTC derivatives execution and clearing in the US and Europe as Dodd-Frank Act and EMIR derivatives reforms are implemented. Celent also evaluates the impact of these new rules on IT spending on derivatives systems components across the buy side, sell side, and market infrastructure.

In a new report, Dodd-Frank and EMIR Derivatives Reforms: Future Scenarios and the Impact on Derivatives Technology, Celent employs a dynamic approach to predict the market structure and market environment to help clients make more informed strategic choices into 2012 and beyond. This report examines overall IT spending and likely areas of IT investment at major industry players, including swaps dealers, non-dealers, asset managers, hedge funds, and CCPs.

The Dodd-Frank Act and the European Market Infrastructure Regulation (EMIR) are wide-reaching reforms which empower regulatory bodies in the US and Europe to regulate swaps market transactions, clearing, and market participation. Regulators have taken on ambitious timelines for drafting and implementing the reforms. However, the future is difficult to predict and regulatory reform could ultimately result in a wide range of market structure possibilities.

“In the end, we predict a two-tier swaps market with distinct dealer-to-dealer execution platforms and dealer-to-client platforms, based on the evolution of existing mechanisms and new market entrants,” says David Easthope, Research Director of Capital Markets at Celent and coauthor of the report. “At the same time, divergent approaches to regulation and rule application mean that the resulting market structure can vary across instrument class and by region.”

“Among market participants, swap dealers and CCPs will see the most widespread impact on their business models and IT budgets,” adds Cubillas Ding, Research Director of Finance & Risk at Celent and coauthor of the report.

This report provides a useful way for IT vendors and financial institutions to deploy an overall framework-based approach to make better decisions. Successive Celent reports will provide deeper dives and indicate the full impact on various areas and components of derivatives systems and other areas of IT.

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 operating unit of Marsh & McLennan Companies [NYSE: MMC].

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Table of Contents

Executive Summary




Dodd-Frank and EMIR Regulation and Derivatives Reforms


Impact of Dodd-Frank and EMIR on the Ecosystem


Compare and Contrast: Dodd-Frank Vs. EMIR


Regulatory Scenarios for OTC Derivatives Markets


Buy Side and Technology Impact


Sell Side and Technology Impact


Summary and Derivatives IT Impact


A View Toward the Future


Leveraging Celent’s Expertise


Related Celent Research


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