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Capital Market platforms, what makes them successful?

The move towards platforms and consortiums


When most of us think of broker-dealers, asset managers, exchanges, we tend to see them as trustful agents for investing our funds. While this is true, these capital market players are also technology companies that maintain large infrastructures for post-trade processing covering all subsequent services following the execution of a trade: clearing, settlement, custody, asset servicing, and related activities, such as collateralisation.
In the last decade, these players experienced a series of transformations of their business models, triggered by high cost of infrastructure maintenance, margins compressing and waves of operational and regulatory pressure enforcing more transparency and stricter compliance rules.
Looking for solutions, we see an evolution of mutualisation of services where financial institutions simplify their architecture and outsource non-differentiating, non-critical services giving rise to new partnership and consortiums that evolved business models towards closed post-trade mini-platforms leveraging innovation and new technology.
While the benefits are real, consortium solutions will reach their limit of what can be done individually or in a small group. Similar to Grab and Uber, they survive by dividing and claiming part of post-trade territories.
Is there scale to transform these initiatives into market utilities and pursuit an open community-wide post-trade platform, that provides the reach, interconnectivity, security and scalability needed by all securities players?


Unfolding inevitable features of a post-trade platform

Think of a post-trade network, well connected and agile, with a solid foundation on which building blocks are designed to provide users with specialised services and solutions to support their post-trade transactions. For this network to become a platform, a few considerations come into play:
- Easiness to on-board, a plug-and-play experience: the effectiveness of a platform derives from its capability to lower barriers to on-board and removing restrictions and limitations to be part of the eco-system.
- Flexibility and pervasiveness in terms of data format and exchange mechanism (messaging, APIs, files).
- Intuitive and enriching are key features of a platform to enable seamless flow of a transaction and mutualise non-competitive repetitive tasks like validation, translation.
- Inclusiveness and capability to attract and maintain all types of capital market players, consumers and service providers. The more users contribute to this eco-system, the faster the platform will scale and become an industry utility.
- Mindful of data privacy and cyber risk, ability to foster secure exchanges and interactions across multiple users and providers.
There is no doubt these embedded features in said platform will generate value. Yet, the sustainable value of such platform lies in its ability to catalyse change and co-create innovative joint solution in collaboration with its users and partners.

The platform could become a trustworthy marketplace that creates means of connections between clients and their third-party providers and at the same time, it could provide them with an enriched foundation to re-invent their solutions and to leverage the potential that exists in partner and clients relationships.

A thriving platform relies on the contribution of all players but market players may need to change their mindset and views on how post-trade interactions take place and how data is shared. The ones who are agile and recognise the value of this transformation, will be the first players to reap the benefits that such platforms brings.

Feel free to share your thoughts on this, I would like to hear your views!

2019

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Simona Catanescu

Simona Catanescu

Market Manager post-trade Asia

SWIFT

Member since

16 Sep 2013

Location

singapore

Blog posts

2

This post is from a series of posts in the group:

Capital Market Technology

This group is for thought leadership on important issues affecting global capital markets and Technologies


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