A new Celent report into the global post-trade industry, commissioned by Nasdaq, analyses trends and challenges affecting central counterparties (CCPs) and central securities depositories (CSDs), and predicts future developments.
Based on an examination of 12 key markets and detailed discussions with 17 major industry participants, the report finds that the changing regulatory environment is the dominant force affecting post-trade industry players, thanks to a post-crash focus on managing systemic risk. Market infrastructure initiatives – such as the worldwide focus on shortening settlement cycles – are also making a big difference. Initiatives from European authorities, such as interoperability, T2S and CSDR, will "fundamentally alter" Europe's post-trade landscape, forging a more competitive one. Other markets, however, are expected to introduce greater competition by allowing international players to compete with domestic incumbents.
"At times there is a lack of clarity and co-ordination among regulators in different jurisdictions," says Arin Ray, Analyst at Celent and co-author of the report. "This results in a lack of synchronisation and standardisation of some of the key regulations, making the task of responding to these changes more difficult."
The research also finds that CCPs are adapting through horizontal integration, evolving to support new asset classes and move into new markets (see table in end notes), as well as new services around collateral management and optimisation. CSDs are also developing new services, particularly in Europe where an inability to do so may threaten survival in a post-T2S environment. These changes are driving major investment in technology, and the research predicts increased adoption of third-party off-the-shelf products.
Anshuman Jaswal, analyst at Celent and co-author of the report, says: "The relevance of third party systems is rising as they allow CCPs and CSDs to meet their IT requirements more quickly and cheaply – particularly for tier 2 and 3 players who lack the wherewithal to build in-house capabilities."
"Regulation is reshaping the demands for post-trade," says Lars Ottersgård, Executive Vice President, Market Technology, Nasdaq. "In some cases, post-trade entities play a different and perhaps more important role in the global financial ecosystem – and with this comes great responsibility. In this new world, everyone needs to be far more efficient with their use of capital, and CCPs and CSDs will be critical in helping the wider system achieve this. This is why increased competition is welcome and, indeed, vital, as it is driving the required innovation and investment in technology."
