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30th November 2020 | Insights

We need to talk about post-trade

Back in April, a snap Acuiti poll in the wake of the unprecedented volumes on global derivatives markets found that 58% of sell-side respondents experienced major issues with back-office processing and trade reconciliations.

The volatility that accompanied the spread of covid-19 and the associated strain on the back-office came during the immense challenge of a move to working-from-home across the globe. While the exchange-traded derivatives industry performed incredibly well considering the strain placed upon it, long-standing deficits in post-trade processing were exposed.

To dig deeper into the issue, Acuiti was commissioned by Broadridge to provide a comprehensive analysis into sell-side exchange-traded derivatives post-trade operations. We surveyed senior executives from across the sell-side and released the results today in a whitepaper.

The core findings were:

  • 95% of tier 1 & 2 banks plan to invest more in post-trade over the next three years than in the last three with 45% planning to invest more than $5m
  • Concern over the ability of existing post-trade infrastructures to handle high volumes and a desire to lower running costs are the key drivers of investment
  • Brokerage payment and static data are the most inefficient processes for tier 1 & 2 banks; client reporting and transaction reporting are the weakest areas for non-bank FCMs
  • 22% of overall respondents would consider fully outsourcing their post-trade operations to a managed services vendor if there was more choice in the market; 40% of non-bank FCMs
  • Artificial intelligence is predicted to be the technology that drives the biggest increase in post-trade efficiency over the next three years
  • Executives across the sell-side are calling out for greater standardisation of data between the FCM and CCP and FCM and client

The whitepaper concludes that the volatility induced by the Covid crisis represents the final warning for many firms that have long known they would need to update their post-trade technology platform but had been putting off investment on account of giving higher priority to investment elsewhere.

There is no quick fix to replacing core back-office technology. But firms that have invested report huge increases in efficiency and reductions in operational overheads.