Trends impacting the future of the securities post-trade industry

The Dutch trade association for the securities industry (DACSI) has teamed up with Turner to conduct a strategic assessment of the market. In its report ‘Future scenarios for the securities post-trade industry’ the authors present an overview of the main trends in the industry, and likely scenarios for the future.

The securities post-trade industry, comprising the securities and derivatives markets, is complex. And one that is facing a wave of change, ranging from technology and consolidation, to economic pressures and changing ways of working within the wider securities and trading landscape. 

The undisputed top driver of change however remains legislation. “It is probably fair to say that post-trade actors have – to a large extent – been consumed by the implementation of legislations (such as MiFID2, EMIR, SFTR, SRD2 and CSDR) in the last ten years,” explained Henk Bruggeman, DACSI’s managing director. This huge influx of new legislation, most of which is driven by European laws, is geared at making the sector more transparent, safe, efficient and customer-centric.

Looking ahead, the topic is expected to remain at the core of change strategies, but in light of broader developments, companies in the landscape will at the same time have to prepare for “a very different future” said Bruggeman. In a bid to help industry players prepare for this future, DACSI joined heads with experts from across the sector and Turner to explore likely scenarios up to 2025. 

Bruggeman: “We gathered key trends and developments together with industry experts and used scenario analysis to map possible future events and consider alternative outcomes. The resulting four scenarios illustrate what the post trade sector might look like in 2025, and what the main implications are for CCPs, CSDs and custodians, as well as for other post-trade actors.” 

Main trends

In terms of trends, the authors put forward five key trends: political uncertainty, the extent of EU financial market integration, technological innovation, harmonisation and standardisation in post-trade processing processes and solutions, and the degree of horizontal / vertical integration in activities.

“Based on the analysis, it is clear that a multitude of trends and developments will impact the future of securities post-trade in Europe,” said Bruggeman. The impact of these developments is dependent on the speed with which events unfold, most notably the regulatory integration of European financial market, and the speed of technological innovation.

“These critical uncertainties have a major impact on the future and are highly uncertain at the same time.” In DACSI’s and Turner’s strategic assessment, these two fundamentals have been anchored as “axes of change”, impacting each of the other components identified (regulation, oversight, national barriers, technological infrastructure and market competition and consolidation).

Future scenarios

The resulting scenarios and impact range from a situation of ‘Great reversal’, where little progress is booked and most of the system remains in its status quo, to a far fetching scenario labelled ‘In transition’, in which accelerated European-wide integration and rapid tech uptake unleashes progress across business models, operations and risk.

One way or another, the authors see a number of common denominators. “Technology will anyhow have a major impact on post-trade,” said Bruggeman, and so too “there will be waves of consolidation among current market participants.” He added, “In all scenarios existing actors will ramp up their collaboration with FinTechs and harmonisation and standardisation will be further elevated.”

An overview of the scenarios and main areas of impact:

For more details on DACSI’s analysis of the post-trade industry request the full report using this link.