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Follow on Google News | Industry Study Finds Need For Improved Post-Trade Automation in Exchange-Traded Derivatives MarketMarket participants say investment in post-trade systems to handle increased volume in cleared derivatives is a priority
By: Omgeo In the report, Cleared Derivatives Processing: A Strategic Approach (http://www.omgeo.com/ Many factors are driving increased trade flow volumes in the ETD market, and while regulations will continue to impact trading behavior in the next few years, participants stated that traditional market factors are set to have a more significant impact on cleared derivatives markets going forward. Roughly 80% of institutional investors say their changes in product usage are due to shifts in asset allocations and/or fund performance. Nearly one-third of buy-side participants report a shift from over-the-counter (OTC) products to futures, and market data tells us that number is likely to grow. A potential leading indicator, CME saw an increase in volume of 11% in Q4 2013, with rate products seeing a 29% jump. Increased Spending To address the issue, buy-side participants are increasing spending on cleared derivatives processing. Greenwich Associates found an average spend of US$800,000 annually on cleared derivatives processing. In North America, nearly 60% of this budget is spent on human resources, with the rest spent on technology. Over 80% of respondents say they have no plans to hire new resources, but instead plan to focus budget dollars on new systems to help streamline the process. This is not the case in Europe. With EMiR implementation now getting under way and MiFID II not yet finalized, money managers in Europe are planning for a dramatic increase in spending - doubling in many cases - to ensure compliance and capacity in the next few years. Reporting complexities are high on the priority list in 2014, with increased volumes expected in 2015 and beyond as clearing mandates finally settle in. “Regulations such as Dodd-Frank, EMiR and MiFID II are placing a greater emphasis on the post-trade processing of exchange traded derivatives. While regulations must be adhered to, investors are getting back to doing what they do best—investing— “In order to prosper in the exchange traded derivatives market, industry participants must ensure they have automated solutions in place that mitigate risk, process post-trade transactions consistently across all clearing methods and asset classes, and meet evolving regulatory demands and industry best practice,” said Ted Leveroni, Executive Director of Derivatives Strategy & External Relations at Omgeo. “Automation is the only way to bridge the gap and drive consistency and operational excellence across a firm.” Methodology During the month of January 2014, Greenwich Associates conducted telephone interviews with over 50 operations professionals at both buy-side and sell-side firms to understand the current state of the Exchange Traded Derivatives (ETD) market. Study participants included 19 respondents from North America, 27 from Europe and 5 from Asia. The full results of the study can be found in the Greenwich Associates white paper titled, “Cleared Derivatives Processing: A Strategic Approach (http://www.omgeo.com/ - Ends - About OmgeoSM Formed in 2001, Omgeo automates trade lifecycle events between investment managers, broker/dealers and custodian banks, enabling 6,500 clients and 80 technology partners in 52 countries around the world to seamlessly connect and interoperate. By automating and streamlining post-trade operations, Omgeo enables clients to accelerate the clearing and settlement of trades, and better manage and reduce their counterparty and credit risk. Omgeo’s strength lies within its global community and its ability to create solutions to enable clients to realize clear returns on their investment strategies, while responding to changing market and regulatory conditions. Across borders, asset classes, and trade lifecycles, Omgeo is the global standard for operational efficiency across the investment industry. Omgeo is a subsidiary of The Depository Trust & Clearing Corporation (DTCC). For more information, please visit www.omgeo.com. End
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