Financial Markets Consulting has released a report, “Collaboration and Utilities ¾ Drivers of Derivatives Processing Transformation,” that discusses the inefficiencies that continue to challenge post-trade processing in both exchange-traded and cleared over-the-counter (OTC) derivatives, along with potential solutions that address these key industry pain points.
Commissioned by SunGard, the study underscores a clear desire among global clearing firms for industry-wide collaboration and utilities to eliminate redundant and inefficient processes, drive the standardization of data, and migrate to systems that are more modular, open and real time.
Results of the study are based on interviews with management teams of clearing firms, clearinghouses, large buy-side firms and other thought leaders from law firms, vendors and trade associations. The study revealed several key sentiments of futures clearing firms around the world, including:
- Interest in collaboration within the industry to define data requirements and work with exchanges, clearinghouses and regulators to standardize data across the globe ¾ and a consistent point of view that utilities are prime candidates to facilitate data standardization
- A desire for a centralized reporting facility that could source trade data from exchanges and clearinghouses, enrich it with client data, and deliver it back to a variety of data repositories in their specific required formats
- The lack of open interfaces between vendors, third-party utilities and processing technologies that makes it difficult, if not impossible, for firms to access data and perform calculations in their core processing engines
- A desire to mutualize common processes across large and mid-tier clearing firms,
- The value in collectively speaking with one voicefor clearing firms across the industry will help clearinghouses and regulators adopt a standardized, global approach to data reporting and the handling of margins, segregation and clearing requirements
According to the research, over 85% of industry leaders named data standardization in trading, clearing and post trade as the most urgent opportunity for addressing their operational challenges. The research also concluded that technology alone cannot solve for this lack of data standardization and that implementing such standardization without a single voice is practically impossible. The study also revealed that utilities can create a strong and unified voice to facilitate industry-wide communication, collaboration and ultimately standardization of data, systems and processes.
Andrew Whyte, president of SunGard’s derivatives utility business, said: “Pressure from the changing regulatory landscape and firms’ internal business priorities are accelerating the industry’s willingness to embrace utilities. This research indicates a clear desire to collaborate and mutualize costs of the most standard and least differentiating processes, looking to turn major cost centers into efficient operations, where the cost of the constant churn of change can be shared. Commercial enterprises, such as SunGard, are well positioned to make the investments necessary to truly innovate.
SunGard’s deep understanding and lengthy association with the post-trade derivatives and securities space, coupled with its next generation technology platform, are the foundation for our newest innovation, SunGard’s Derivatives Utility – where we are building an operational processing center of excellence around core cleared derivatives processing. I look forward to expanding SunGard’s role in helping to transform the industry.”