Regulatory changes are fragmenting OTC derivatives processing, say specialists

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Over-the-counter derivatives are getting harder to manage thanks to changes in regulations and market practices, according to Message Automation Limited.

The derivatives connectivity and regulation specialists said that processing is becoming increasingly fragmented, while data is inconsistent, increasing risks, costs and operational inefficiencies.

Research into buy and sell side firms across Europe, Asia and North America found that, instead or reducing risk or harmonising processes, the growing involvement of clearing houses, execution platforms, trade reporting repositories and other third parties is actually making things worse. Many financial firms are having to rethink the way that they approach OTC derivatives, as current strategies are struggling to cope with a market and regulatory environment that is becoming ever more complex.

Many of the firms we speak to agree that this vast array of complexity is driving up internal costs and more importantly increasing operational risk,” said Hugh Daly, CEO of Message Automation. “And, because the market and regulatory changes are not delivering much needed harmonisation and clarity, we strongly believe that the firms involved need to take control themselves by using a single cross-asset platform that creates transparency across their entire OTC derivatives processing environment.

 

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