New white paper explores effects of impending regulation on market structure and the implications for firms’ business models
Fidessa group plc (LSE: FDSA), provider of high-performance trading, investment management and information solutions for the world’s financial community, has today announced the publication of a new white paper, For Whom the Bell Tolls, which analyses the seismic changes affecting the derivatives markets.
The paper examines how the previously separate OTC and exchange-traded markets are not only being reshaped but also brought together by a combination of different yet overlapping regulations. It also looks at the impact of these changes on market participants and how some are already reshaping their businesses to take advantage of them.
The paper is underpinned by the argument that the sheer weight and diversity of regulation coming to the derivatives space means that firms must look beyond pure compliance and adapt their business model and technology in order to benefit from the new landscape.
It considers three key changes in detail. First it looks at the drive to move bilateral OTC trading onto centrally cleared, electronic platforms. Querying the validity of the regulators’ belief that this approach is intrinsically safer, it considers the subtle interplay between Dodd-Frank and EMIR and discusses some of the unintended consequences that could result.
Second, the paper examines the growing competition that is emerging between the derivatives venues themselves and discusses how this will affect market participants. Finally it turns its attention to clearing and the interplay between the OTC and exchange-traded markets.
"Just as we saw with equities, regulation and technology are combining in new ways and firms need to decide how they are going to run this particular gauntlet." said Steve Grob, Director of Group Strategy at Fidessa and author of the paper. He continued: "Those firms that can model their businesses appropriately, and manage the additional complexity in their workflow, are likely to emerge the winners".
For Whom the Bell Tolls is available via the Fidessa website.