José-Oriol Bosch takes us through his viewpoints for 2017.
Looking ahead to 2017, what are the key trends you see shaping the market infrastructure industry?
Incredibly, exchanges are going against the political and economic trends of seeking internal opportunities and closing borders or trades with other countries. Instead, you could say that exchanges have been seeking large and consolidated participation in global venues through mergers and/or regional integrated markets such as MILA, the Deutsche Börse-LSE merger intention and Shanghai-Hong Kong Stock Connect integration, to name a few examples.
The basics of simple and straightforward trading practices are coming back at a global level; local investors or institutions want to trade through their integrated exchanges global financial assets in the same way as they do with their local stocks and bonds. It is clear that fragmentation, algorithmic gaming and lack of depth in books are some of the most important concerns for market participants who will continue to reap benefits from local, regional and global integration of order books as trading costs will drop even more.
On the other hand, safe venues will become essential in the near future. Exchanges are driving well spent resources in speed bumps, reliable trading systems and unbreakable firewalls to avoid flash crashes, trading halts and risks of a growing hacking culture worldwide.
Do you think the role of exchanges and CCPs will evolve over the coming years, and if so, how?
In the exchange and clearing businesses, as in any other industry, constant product and service innovation is essential, but improvement of the current counterpart services along with expedite clearing procedures (without overlooking settlement risks) will be mandatory.
To put this in perspective, in a few months, the United States, Mexico and other countries worldwide will change cash market settlement from T+3 days to T+2 as means of reducing delivery risks.
Another important key improvement, which will involve every clearing house worldwide, will be to meet global standards to reach the demanding requests of markets integration as mentioned earlier. The CCPs need to be closer to exchanges in every region and must be ready for local mergers without affecting settlement procedures. But highest global standards are essential to prevent systemic risks; therefore CCPs should reach the same technological and communication levels to give investors certainty in their trading activities within the same country or region across the world.
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