Article

Future of post-trade

For the last decades post-trade had been standing in the shadow of the vibrant securities trading industry. But recent developments make post-trade an exciting field of business. The post-trade landscape and its market participants have been facing dramatic changes which will spin business models, processes, and networks. To predict the impacts of current disruptive technologies, FinTechs, regulations, initiatives, and economic development feels like the proverbial glance into the crystal ball and opens the door for strategic positioning.

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

In the European Union, the post-trade market is historically grown which led to a highly fragmented infrastructure and inefficiencies across Europe. As post-trade was identified as one the major obstacle to a single European capital market, the Eurosystem established TARGET2-Securities, a pan-European settlement platform. Furthermore, regulatory harmonization initiatives opened the market and new technologies are shaking the market.

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 drive innovation which is applied by established players – a stimulating co-existence. 
  • Scenario 2: The roaring 30s
    It needed only small triggers like nationalism and a destabilized financial system which has terminated the journey of the EU. A group of hedge funds and resilient FinTechs were the first ones to benefit from inefficiencies in the fragmented market. All this happened at the expense of the former big players. Transaction volumes are far less than in the past, but the market with its innovations has become adventurous. 
  • 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. FinTechs are able to survive in small niches and for post-trade players such as CSDs market dominance is key. 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 in-depth know-how. 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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