Global trends in regulated securities markets: how to return to a path of growth?
“The next ten years in the securities markets are likely to be far more transformational than what has come before. All the players in the securities services industry need to collaborate in order to foster the innovations that will deliver greater value to all our institutional clients.”
Since 2008 securities market participants have focused on being compliant with a difficult and complex regulatory landscape, which often seems like a moving target. In order to be compliant firms have invested a great deal of time and money. But solving regulatory constraints is not a strategy per se. Market participants have now come to a time where they are asking what the return on this investment in compliance should be.
Previously, organisations were keen to build all of the components of the post-trade value chain themselves. But with scarce resources and increasing regulatory burdens, this business model is no longer appropriate. Decisions are being made about what is core and non-core to the business and investment managers, broker dealers and insurance companies are examining to what extent they can co-operate and collaborate with custodians and securities services providers to achieve their goals while remaining compliant.
There are opportunities for some firms to move up the value chain and provide services that add value to those who can no longer afford to constantly adapt their internal operations on their own. Securities services providers are well placed to do this as they have developed the tools and capabilities to serve investment management firms, insurance companies and broker dealers.
Collateral management provides a good example of this: firms are required by regulations such as EMIR and Dodd Frank to post collateral at myriad clearing firms. A collaborative approach works well here as some providers, such as Societe Generale, can mutualise the innovations and investments we have made in order to be compliant with collateral management regulatory requirements and offer them to third party customers.
This can also work with regards to KYC requirements. All participants in the securities markets have to collect the same information about their clients; it would make sense to have a utility approach such as SWIFT’s KYC Registry to meet these requirements.
One of the main drivers for securities market firms is the need to reduce costs in the middle and back offices. By partnering with providers that can offer more efficient and innovative services, these firms can not only reduce costs but also move to the next level of services.
Investing to be only compliant is no longer enough; firms must be agile and able to sustain investment over the long term. Agile, lean and innovative providers present the ideal partner as firms seek to navigate the next decade in the securities market environment.