OTC Derivatives Market: Achieving High Performance in the New Regulatory Regime

The US Dodd-Frank Act mandated sweeping regulatory changes to the $708 trillion over-the-counter (OTC) derivatives market. As the capital markets industry prepares for the new regime, certain players have expressed concern that the proposed rules for swap exchange facilities (SEFs) or organized trading facilities (OTF) could adversely affect the structure of a fairly liquid and flexible market.

Accenture recommends that organizations focus instead on reevaluating and refining their operations to seize new opportunities for differentiation. Read this report to learn which features will set high performers apart.

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As the capital markets industry waits for the dust to settle on the new regulatory regime for over-the-counter (OTC) derivatives, certain market players are already taking steps to secure their competitive positions.

Organizations that intend to become swap exchange facilities (SEFs)—including established interdealer brokers, such as ICAP, and new entrants, such as State Street—are investing significantly in their interdealer platforms to support SEF architecture.

On the sell side, tier-1 banks with clearing broker propositions are defining their strategies for execution broker offerings. On the buy side, a handful of players have tested scenarios and begun upgrading their technology infrastructures to connect with industry participants.

Many capital markets organizations are expected to launch swap exchange facilities (SEFs) or organized trading facilities (OTFs) in response to the new regulatory regime for over-the-counter (OTC) derivatives. Three key factors will help determine which market players survive:

• Market liquidity and depth
• Infrastructure capacity and resiliency
• Client relationships

Robust technology can help elevate an organization’s performance in all three areas. IT infrastructure that is capable of systematically processing large trade volumes without breaks in workflow will be a key differentiating factor and a source of competitive advantage.

As the capital markets industry prepares for imminent regulatory change in the over-the-counter (OTC) derivatives market, Accenture recommends that organizations:

• Identify which aspects of their businesses will be most affected by the new regime.
  
  
• Integrate seamlessly with swap exchange facilities (SEFs) and organized trading facilities (OTFs).
  
  
• Enhance, adapt and test their trading tools.
  
  
• Develop strategies, processes and methods to support new organizational models.
  
  
• Develop strategic models and repositories for accurate data capture.

Read the report to learn more about our services in each of these areas.