Investment in derivatives post-trade set to soar
Ninety five per cent of tier 1 and 2 banks plan to invest more in derivatives post-trade operations over the next three years than in the last three, a major study by Acuiti has found.
Almost half of tier 1 and 2 banks are expecting to invest more than USD5 million over the next three years in long-awaited upgrades to post-trade processing capacity.
The study by Acuiti, which is released today in a whitepaper entitled The Growing Need to Invest in Derivatives Post-Trade, was sponsored by Broadridge Financial Solutions, a global Fintech leader.
Acuiti found that the record volumes in derivatives markets during the initial spread of Covid in March and April 2020 pushed post-trade infrastructures to breaking point at several institutions.
This has resulted in a re-evaluation of the investment case across the sell-side and a sharp shift in attitudes to investment.
The whitepaper released today also analyses the current pinch points in post-trade operations and the drivers of future innovations.
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.
“Post-trade has been an overlooked segment of the derivatives industry, but advanced new solutions are available to solve issues that the industry is currently facing with incumbent technology,” says Justin Llewellyn-Jones, head of capital markets (equities, FX and derivatives) at Broadridge.
“Broadridge’s continual investment in its technology stack means that we are in a strong position to help firms across the industry drive transformational levels of efficiency and adapt to the rapidly modernising post-trade landscape.”
Will Mitting, founder and managing director of Acuiti, says: “The unprecedented volumes experienced during the spring volatility confirmed what many in the market have known for some time: investment in post-trade has lagged behind other sell-side operations.
“There is no quick fix to replacing core back-office technology. But firms that have invested report huge increases in efficiencies and reductions in operational overheads.”