Innovation in Focus: Efficiencies, Outsourcing, and Utilities in Post-Trading

by Joséphine de Chazournes, September 5, 2014
Industry Trends
EMEA

Abstract

European post-trading’s revamp of the ecosystem and infrastructure transformation, the first in the last 20 years, has triggered heavy technology, operations, and systems investments while the industry as a whole is under extreme cost pressure. Both technology investments and cost pressures make a compelling case for more innovation in collaboration in post-trading: moving from fortresses to federated models.

In the report Innovation in Focus: Efficiencies, Outsourcing, and Utilities in Post-Trading, Celent discusses how post-trade market participants have to explore reducing costs not only through efficiencies but also through mutualization, and accelerating revenues through collaboration and in new business activities/models through partnerships.

“Reducing cost through efficiencies provides bigger opportunities to optimize financial institutions’ economics through simplifying operations, pooling collateral, and cutting out the middleman,” says Joséphine de Chazournes, Senior Analyst with Celent’s Securities & Investments Group and author of the report.

“For financial institutions aiming to simplify and standardize operations to reduce costs, BPO is a first step for market participants. Utilities, however, provide opportunities to save more at a group/industry level,” adds de Chazournes.

Collaboration between niche custodians and big CSDs is an option to accelerate revenues in asset servicing, where individuals would otherwise hardly be competing with the leading European custodians. For market infrastructure, reducing costs through mutualization is harder to implement than BPO, outsourcing, or account operator model (AOM) working for small CSDs needing to keep sovereignty/responsibility and to enhance post-trade economics. When sovereignty is not an issue, there are opportunities to accelerate revenues through collaboration and utilities: the potential verticalization of flow that we expect could also drive groups of smaller CSDs to collaborate or even federate.

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

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Michele Pace
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Tel: +1 212 345 1366

Europe (London)
Chris Williams
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Tel: +44 (0)782 448 3336

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Table of Contents

Executive Summary

1

Introduction

2

Post-Trade Ecosystem Transformation

4

Reducing Cost and Accelerating Revenues

7

Conclusion

10

Leveraging Celent’s Expertise

11

 

Support for Financial Institutions

11

 

Support for Vendors

11

Related Celent Research

12

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