Sell-side to invest in risk management amid regulatory challenges and risk events

Rick Steves

35% of senior market risk executives surveyed expect their firms to increase headcount while 86% are planning to deploy new systems to support their changing approach.

BTC, ETH, BNB, ADA, XRP, DOGE, DOT, UNI: Monthly crypto crash is the new thing?

The sell-side is increasing headcount and investing in market risk to meet new regulatory and operational challenges, according to a study conducted by Acuiti and commissioned by KRM22.

Acuiti surveyed top market risk executives across the sell-side and found that half of the respondents increased staffing levels over the last 18 months with 7% reporting a significant increase.

Sell-side to deal with Fundamental Review of the Trading Book (FRTB)

Greater automation and nearer real-time views of risk exposures have also become attractive assets for the sell-side amid the ongoing implementation of the Fundamental Review of the Trading Book (FRTB).

2022 is likely to see a significant change in risk management across the sell-side, with only 14% of respondents expecting to maintain the same approach to market risk management over the next 12 months. In the opposite way, 41% of participants said they plan a significant overhaul.

Loss prevention and the anticipation of a major risk event are driving change as well as regulatory pressure reflecting the introduction of FRTB.

Sell-side firms will be investing in both headcount and technology in market risk over the next 12 months, according to Acuiti, which has spoken to senior market risk executives, with 35% expecting to increase headcount while 86% are planning to deploy new systems to support their changing approach.

Dave Zurkowski, Head of Market Risk at KRM22, said: “For the last 10 years firms have channeled investment into Compliance functions to address increased regulation following the Financial Crisis. More recently, with major events such as the COVID-19 pandemic, firms are recognising the need to shift some of this focus toward Market Risk, moving away from legacy platforms and disparate processes.

“Firms are seeking to deploy technology solutions that perform during times of high stress and bring together risk metrics across business units, providing insights that ultimately improve the customer experience. KRM22 is addressing these challenges through our Global Risk Platform, bringing together data from across the firm to enable better, more informed decision making across the organisation.”

Will Mitting, managing director of Acuiti, said: “Expectations of volatility throughout 2022 are high as multiple factors from international politics to localised inflation in major markets raise the prospect of major shocks to equity and fixed income markets.

“Following a period that has seen several high-profile defaults and unprecedented market volatility, market risk has shot up the agenda for the sell-side. This was shown in the KRM22 Capital Markets Risk Sentiment Index, released in Q4 2021, which found that market risk was the highest priority for banks and the second highest priority overall.”

Read this next

Digital Assets

GK8 now allows clients to control their digital assets as they would their fiat

“As the institutional market is increasingly turning to self custody, our policy engine empowers them to automate transactions, approvals, and even crucial workflows, while providing the highest degree of security, consistency, governance and control.”

Digital Assets

Retail CBDCs in the UK: “Welcomed” by CryptoUK and R3, but “Dystopian” for ETC Group

“At this stage, we judge it likely that the digital pound will be needed in the future. It is too early to decide whether to introduce the digital pound, but we are convinced preparatory work is justified”, said the BoE and HM Treasury.

Institutional FX

Centroid taps Iress API to provide retail brokers with real-time market data

“It has always been a challenge to have an efficient, elegant solution for market data and order execution for retail brokers, but with Iress we have found absolutely the right partner to add to our client offering.”

Digital Assets

Ramp launches FCA-approved off-ramp product, onboards Brave, Trust Wallet, Ledger

“To obtain and maintain our FCA registration, we must meet and operate within their strict anti-money laundering and counter-terrorist financing standards. This is a huge achievement for us, as compliance is a cornerstone of our business and what we stand for.”

Institutional FX

State Street launches FIX API for Fund Connect ETF platform

“Expanding from proprietary APIs to the FIX industry standard will bring us closer to our goal of 100% digital interactions. This is another example of innovations we’ve brought to our operating model as we celebrate 30 years of servicing ETFs since the launch of SPY.”

Industry News

HollyWally opens office in Portugal to bring B2B2C wallet-as-a-service platform to Europe

“We looked at a number of centers for startups throughout Europe and were attracted straight away to Lisbon. There is great Government support and enthusiasm for startups, it’s well positioned between our Asian and US offices, it’s a cost-effective city in which to base a fintech and it’s a beautiful place.”

Retail FX

Eightcap integrates Acuity’s economic calendar for trade ideas on MT4 or MT5

“By incorporating Acuity’s cutting-edge AI technology into our platform, we are able to offer our clients a powerful new tool that will help them stay ahead of the markets. We are committed to providing an extensive range of tools and educational resources that will enhance our clients’ trading experience and allow them to trade smarter.”

Digital Assets

Fuse Network powers Web3 economy, payments with ‘Fuse 2.0’

Web3 payments revolution startup Fuse Network announced the release of ‘Fuse 2.0.’ alongside a new roadmap, whitepaper, and fresh branding aimed at bringing crypto payments to the mainstream global economy.

Inside View

Private Equity Renaissance

Recent years have seen a resurgence in the concept of trading physical equities, with a slew of new arrivals joining the market for what is arguably one of the oldest forms of investing. But what has been the driving force behind this change in momentum?

<