Last week, I shared how proposed reforms to the over-the-counter (OTC) derivatives market can create opportunities for market players to provide value-added services, and introduced two business models that can enable high performance. This week, I will examine the other part of the equation: how technology infrastructure can be a differentiator.

Technology infrastructure as differentiator

In the new trading environment, technology infrastructure will be a differentiator. All market players, regardless of business model, will need robust, scalable technology to support trade volumes, complex workflows and straight-through processing. Keys to success include:

  • Connectivity across middleware platforms, clearing houses, buyers/sellers and swap data repositories.
  • Interoperability between Swap Exchange Facilities (SEFs), buyers and sellers, enabling real-time pricing and trade executions.
  • Flexibility to adapt to regulatory changes, as well as new products or services required by users.
  • Streamlined processes and workflows to reduce the number of manual points and create scalable infrastructure.
  • Cooperation between front office, operations and technology to make effective business decisions.

Next steps

While regulators finalize the details of the Dodd-Frank Act, there is an opportunity for market players to reevaluate their business models, workflows and technology infrastructure. Accenture projects an initial rush of SEF registrations. However, market dynamics, including market liquidity and depth, existing technology infrastructure and established relationships, will determine the key long-term players. Ultimately, robust technology is expected to be a key factor in the success of the market and its participants.

To learn more, download The OTC Derivatives Market: Achieving High Performance in the New Regulatory Regime (pdf; opens in a new window).