The Future Of Securities Post-Trade

If you can order physical goods online and have them delivered the next day or even the same day on Amazon, why should you have to wait two days for electronically delivered securities to arrive in your account? A new Deutsche Bank whitepaper looks at how far the industry has come and what is needed going forward to “Amazonise” the securities post-trade landscape. Deutsche Bank’s Emma Johnson and Mike Clarke capture the key points

While the European securities post-trade industry is taking steps towards harmonisation and integration, a standardised interface for investors, as well as uniform rules and regulations, are still needed to drive true market efficiency.

In the years following the financial crisis of 2008 to 2009, custodians have found themselves performing an increasingly difficult balancing act of compliance with tightening regulatory requirements, while adapting to infrastructure changes and meeting the growing demands of their clients.

The industry as a whole has experienced considerable development, upheaval and financial commitment, but where does it leave us now? Participants could be forgiven for wondering whether it has taken us far enough. Why is it, for example, that physical goods can be ordered and delivered within the space of 24 hours, while an electronically delivered security still takes two days to arrive in the beneficiary’s account?

To address this question, and avoid being disrupted, the roles of industry participants will need to evolve. Custodians need to become hyper efficient and apply a series of technical solutions to do so, be they Application Program Interfaces (API), Artificial Intelligence (AI), Enterprise Data Platforms, or the use Micro Services alongside existing architectures.

The opportunities are certainly exciting, and the benefits enticing. However, the challenges here are numerous. First, the wholesale change of market infrastructure tends to be a long process with large scale projects spanning many years. Second, we need to be able to innovate digital services for our clients, to focus on using technology to solve business problems, promote efficiency and streamline process in each service. Third, different use cases will require the deployment of various technology tools, targeted towards each use case.

In our latest whitepaper, we explore how far the last 10 years of regulatory and industry change have taken us, what harmonisation has been achieved by initiatives such as TARGET2-Securities, and what barriers and threats to harmony remain. At the same time, we also explore what a future vision of a new “Amazonised” post-trade landscape might look like and how the industry can get closer to this kind of experience.

While the current post trade agenda takes us further forward, perhaps the largest challenges remain. Without a solid foundation, including tax and securities law reform, new technology and new market entrants will do little to shift the status quo. But, by tackling the challenges head on, removing the barriers which challenge the innovation and the evolution of the industry, there is an opportunity to create a new and exciting landscape for post-trade in Europe.

To read more about the future of securities post-trade, please visit: https://cib.db.com/insights-and-initiatives/ white-papers/transitioning-into-the-future-of-securitiespost-trade.htm

Emma Johnson Director of Regulatory and Market Initiatives Deutsche Bank Securities Services

Mike Clarke Head of EMEA Product Management - Securities Services Deutsche Bank Securities Services