More collaboration in the listed derivatives industry is necessary for coping with data standardisation and reconciliation challenges, as well as for dealing with inefficient processing, according to a Financial Markets Consulting report commissioned by SunGard.
The report shows that 75 percent of respondents supported more industry collaboration. There was also a desire to use more utilities in the market, in order to minimise some of the redundant and inefficient processes in use today.
A vast majority of about 85 percent cited data standardisdation in trading, clearing and post-trade as the most pressing opportunity for addressing operational challenges.
There was also interest a centralised reporting facility for sourcing trade data from exchanges and adding client data, before delivering it back to data depositories in the required format.
The report identified a lack of open communication between vendors, third-party utilities and processing technologies, making it difficult for firms to access data and perform calculations in core processing engines.
Andrew Whyte, president of SunGard’s derivatives utility business, said: “Pressure from the changing regulatory landscape and firms’ internal business priorities are accelerating the industry’s willingness to embrace utilities.”
“This research indicates a clear desire to collaborate and mutualise costs of the most standard and least differentiating processes, looking to turn major cost centres in to efficient operations, where the cost of the constant churn of change can be shared.”
The report concluded that the only realistically affordable way to deliver the efficiencies required for the modern market is for industry players to work together. It noted that, in the post-crisis environment where profit margins are reduced, no one firm can afford to take the lead on driving this collaboration – collaboration that was not necessary pre-crisis.
It also suggested that utilities could be the key to this collaboration, driving standardisation and leading to significant cost savings.
According to the report, third-party players can solve the same problem for multiple market players and can deliver new solutions to the market more quickly, easing the transition in to a more innovative and sustainable industry environment.
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