Grygo is the chief content officer for FTF
As we are seeing this week via domestic and international events, it is very difficult to make any predictions for 2021 let alone name the trends for the market structure facilitating securities trading and operations.
However, market research firm Greenwich Associates in a new report, “Top Market Structure Trends for 2021,” authored by industry analysts Daniel J. Connell, David Easthope, CFA, Kevin McPartland, Shane Swanson, Danielle Tierney, and Brad Tingley intrepidly focuses on key market structure trends that will likely advance this year.
The bottom line is that financial technology innovation has not been halted by the pandemic or political upheavals.
Here are some highlights from the report:
- Post-COVID-19 Pandemic/Post-Election Regulatory Reform: “Major market shocks often trigger regulatory reform. So do transitions in the White House and of course, there is Brexit. However, although the market shock of last spring attracted scrutiny from market regulators, technology and market structure actually performed well in 2020, and the quick market recovery could make large-scale reform hard to justify.”
- Replacing the London Inter-bank Offered Rate (LIBOR) May Take More Labor: “Despite a slight reprieve in November 2020, Libor’s decommissioning is still pushing forward. From a market structure perspective, the transition presents a unique challenge for the largest futures contract in the world — CME’s eurodollar complex, which is pegged to Libor.”
- Exchanges Face an Identity Crisis: “… The world of exchange groups is going through a wholesale change. Nasdaq now identifies as a fintech firm. ICE generated a third of its revenue from data in 2019 and LSE [the London Stock Exchange] is poised to buy Refinitiv for $27 billion. Further, fixed-income trading venues once referred to as ‘ECNs,’ [electronic communication networks] now have market capitalizations that rival some of the oldest and largest exchange groups. Expect this transformation to accelerate in 2021.”
- Tokenized Assets: “ … Security tokens should have a breakout year in 2021, with firms seeking to solve for the top two challenges: regulatory certainty and secondary market liquidity. That will drive continued creation and adoption of platforms for trading, custody, and derivatives, including brand new ATSs [alternative trading systems].”
