FCM and derivatives brokers want less vendor partners – survey

Rick Steves

85% of respondents said that integrating third-party vendor solutions into post-trade ecosystems was either very or quite challenging.

An Acuiti report commissioned by FIS found that the majority of sell-side firms are planning on reducing the number of vendors they work with for derivatives middle to back-office technology in a quest to modernize and simplify post-trade ecosystems.

The study surveyed 59 senior executives from FCMs and derivatives brokers from across the global market. And while most have increased the number of vendors they work with in cleared derivatives post-trade over the past five years, they now plan to decrease vendors in order to lower the overall cost of ownership and improve STP.

A plethora of firms have come to the market with products designed for specific processes such as reconciliations or trade management. This has resulted in a proliferation of vendor relationships and increased complexity in terms of workflows and achieving interoperability between systems.

85% of respondents said that integrating third-party vendor solutions into post-trade ecosystems was either very or quite challenging.

Will Mitting, founder and managing director of Acuiti, said: “Our previous report on post-trade last year highlighted the growing appetite to invest among FCMs in the wake of the volatility experienced in the first half of 2020. The report digs deeper into how firms are approaching that modernization programme.

“What this study finds is that fears about concentration risk of vendors are being replaced by a desire to simplify operations and reduce the number of relationships. As the hurdle to onboard third-parties increases across the sell-side, this is a trend we are likely to see continue.”

According to the report, investment in post-trade technology is either important or crucial to expanding product coverage, the development of new services, and expanding into new client segments over the next three years.

“The sell-side is increasingly looking to post-trade technology as an enabler of growth rather than a limiting factor. Modernisation of post-trade architectures and the end to the ‘bolt-on’ approach to upgrades will be a key factor in the next phase of the development of global derivatives markets”, Mr. Mitting.

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