Article

Future of post-trade

In the last few decades, post-trade has stood in the shadow of the vibrant securities trading industry. However, recent developments have made post-trade an exciting field of business. The post-trade landscape and its market participants have faced dramatic changes that will transform business models, processes, and networks. The effects of current disruptive technologies, FinTechs, regulations, and economic development are of course difficult to predict. Nevertheless, they offer opportunities for a new strategic positioning.

Post-trading is – as the name suggests – the part of the value chain in capital markets that follows the trade. The main players in the post-trade market are banks, custodians, central counterparties (CCP) and central securities depositories (CSD) that offer services such as securities processing, clearing and settlement of securities transaction, and other asset servicing (e.g. collateral management, corporate actions, etc).

In the European Union, the market for post-trade has grown historically. This has resulted in a highly fragmented infrastructure and inefficiencies across Europe. As the European post-trade structure was identified as a major obstacle to a single European capital market, the Eurosystem established TARGET2-Securities - a pan-European settlement platform. While regulatory harmonization initiatives aim at opening the European market, new technologies are challenging the status quo.

What are possible future scenarios?

  • Scenario 1: Real-time – the fulfilled dream
    In 2030, the integration of the EU post-trade market has deepened and regulation has been harmonized. A fully operating blockchain has let the ultimate dream become true: real-time settlement. FinTechs are driving innovations that establish players apply as well – a stimulating co-existence.
  • Scenario 2: The roaring 30s
    It needed only small triggers like nationalism and a destabilized financial system that abruptly terminated the journey of the EU. A group of hedge funds and resilient FinTechs were the first ones to benefit from inefficiencies in a fragmented market. All this happened at the expense of the former big players. Although transaction volumes has decreased significantly, the market is driven by innovations.
  • Scenario 3: Dancing to a Chinese tune
    Nationalist tendencies have led to the end of the European Union. The golden times of post-trading are over – and so are all dynamics in the European post-trade market. While FinTechs are able to survive in small niches, for post-trade players such as CSDs market dominance is key. However, post-trade innovations and attractive capital markets infrastructures are outside of the EU.
  • Scenario 4: Giants heaven
    Post-trade was just not the right place for FinTechs. They were not able to challenge the old players’ long-proven concepts and gain the critical mass. The European Union still exists and has overcome the last harmonization barriers but at a low innovative potential.

 

Our team of strategical and functional experts has long-standing market experience and expertise. Together with our unique Artificial Intelligence tool developed for the post-trade industry, we are looking forward to answer your challenges and support you in your aspirations.

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