2nd Theme of SIBOS: Asset Class Diversity

Many post-trade systems date from a time when firms predominantly traded cash equities and fixed-income securities. As additional asset classes such as swaps, futures and options have become more prevalent, firmshave been forced to shoehorn these assets into systems that were not designed to handle them. The development of these asset classes is set to continue, as traders look for competitive advantage by creating new structures, resulting in a growing number of different instruments for post-trade systems to cope with.

The graph below shows one example of how important alternative asset classes have become. Exchange traded fund assets in the US have grown from US$65bn in 2000 to nearly US$1.1tn in early 2011, an annual compound growth rate of more than 30%.

 

 

 

Some asset classes also bring other complications. Multi participant trades are also more intricate because they involve three or more counterparties – for example a prime broker, an executing broker and a buy-side firm. These firms may all be working in slightly different ways, with variations in the terminology they use and their internal work flows.

Amending existing systems to add the necessary fields often requires time-consuming changes to code and a new releaseof the software. Firms therefore need a post-trade system that can adapt to different asset classes, with a scalable matching engine that can keep pace with developments and which does not involve complex projects and new code to add fields.