Sapient Global Markets Survey Reveals Industry Concerns Surrounding Derivatives Clearing
Industry utility model cited as a potential solution to overcoming
operational cost, complexity and commoditization of clearing services.
Global Markets, a division of Sapient (NASDAQ: SAPE), and leading
global provider of business technology and consulting services for the
capital and commodity markets, today announced the findings of a new
survey it conducted examining industry attitudes towards changes in
The survey, which saw a total of 153 qualified respondents, was
conducted during the 2014 FIA Expo in Chicago, and revealed three
significant themes. A total of 81% of respondents cited their greatest
concerns as being the uncertainty caused by regulations, the cost of
compliance associated with new clearing mandates and implementing a new
technology solution. To relieve some of these pressures, more than half
of those surveyed also indicated positive interest in the establishment
of purpose-built market utilities.
Central clearing mandates are
overwhelming firms' ability to generate the required reporting due to
sheer volume and complexity. The Sapient survey revealed 41% of
exchanges, a similar number of broker dealers and 43% of HFT terms
agreed that continued regulatory uncertainty and the lack of
understanding of changing rules were the area of greatest concern.
Cost of Clearing
The central clearing environment is
creating more challenges for businesses to reach their revenue targets
and make the necessary investments to meet new and evolving regulatory
mandates. In the Sapient survey, 40% of FCMs and 37.5% of sell-side
firms reinforced this, highlighting the cost related to new clearing
regulations as their greatest concern. Sell-side firms are especially
affected because it ultimately costs more for them to stay in the
business, placing greater pressure on their current business models.
Potential of Clearing Utilities
infrastructure is highly commoditized from one firm to the next, and
there is little strategic advantage or opportunity to differentiate
services or increase revenue. As a result, market participants,
regulators and exchanges are beginning to recognize the idea of
clearing utilities as the answer to reducing the cost of complying
with central clearing mandates and improving business profitability.
50% or more of buy-side firms, FCMs, proprietary HFT and sell-side
firms surveyed were interested in using a purpose-built utility to
address unique buy-side clearing requirements.
"Regulation is placing tremendous pressure on the clearing community,
with conversations inevitability focused on the costs involved and how
to potentially alleviate them," commented Jim Bennett, managing director
at Sapient Global Markets. "As a result, the industry is on the brink of
transformation, as firms search for new ways to differentiate their
clearing offerings while commoditizing the processes that either fail to
offer competitive advantage or require decoupling due to regulatory
requirements. This is especially true as firms consider how to increase
efficiencies, reduce costs and improve returns while addressing the
global nature of these regulations."
To download a full copy of the survey results, please visit the Sapient
Global Markets Clearing paper.
About Sapient Global Markets:
Sapient Global Markets, a division of Sapient® (NASDAQ: SAPE), is a
leading provider of services to today's evolving financial and commodity
markets. We provide a full range of capabilities to help our clients
grow and enhance their businesses, create robust and transparent
infrastructure, manage operating costs, and foster innovation throughout
their organizations. We offer services across Advisory, Analytics,
Technology, and Process, as well as unique methodologies in program
management, technology development, and process outsourcing. Sapient
Global Markets operates in key financial and commodity centers
worldwide, including Boston, Calgary, Chicago, Dusseldorf, Frankfurt,
Houston, London, Los Angeles, Milan, New York, Singapore, Washington
D.C. and Zurich, as well as in large technology development and
operations outsourcing centers in Bangalore, Delhi, and Noida, India.
For more information, visit www.sapientglobalmarkets.com.
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Sapient Media Contact:
Geoff Whitehouse, +44 (0) 207 456 6550
Source: Sapient Global Markets
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