Last week, I shared the concerns of market players regarding proposed reforms to the over-the-counter (OTC) derivatives market. While they are valid concerns, it’s important not to lose sight of the opportunities for competitive differentiation, even as the structure of the OTC derivatives market is shifting.

Seize opportunities today

Already, both sell- and buy-side participants are starting to define their position in the market. Players with their sights set on becoming a Swap Execution Facility (SEF) have started investing in and developing interdealer platforms to support a SEF architecture. In addition, many tier-1 banks have started to define their strategies for an execution broker offering. While the buy-side has been more reserved, a few participants are upgrading their technology infrastructure and building connectivity with industry participants.

Future considerations

Many market players expect the emphasis on clearing and trade reporting will shift some middle-office functions further up in the workflow. Accenture expects that SEFs and Organised Trading Facilities (OTFs) will need to consider rules for trade reporting and real-time reporting, plus the possibility of performing reference data and trade limits checks.

This could create opportunities for existing affirmation platforms to reinvent themselves as reference data providers. In addition, new or existing players could carve out a piece of the market by establishing themselves as a hub within the highly connected market.

Accenture believes that those market players that can look beyond the storm of regulatory confusion have the opportunity to create meaningful differentiation—and achieve high performance.

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