18.8.2011
By Simon Miller
The market structure for swap market participants will fall apart if IT infrastructures are not upgraded according to a report released today.
Tabb Group’s Technology and Reform: Data, Derivatives and Decision Making claims that legislation such as the Dodd-Frank Act in the US and European Market Infrastructure Regulation on OTC derivatives trading will lead to the creation of automated environments “where electronic events must rapidly take place across electronic trading, central clearing, reporting and risk management processes” which will result in greater focus on the robustness of messaging systems.
The report warned: "Without an upgrade from the makeshift inter-platform communications methods that most market participants use now to a high-speed, high-capacity, reliable messaging backbone, the newly proposed market structure of execution venues, clearinghouses and real-time reporting will quickly fall apart."
The study added that reform will result in an explosion in data volumes and trades and increased data complexity, and will thus require high-throughput, low-latency messaging. According to the report, "now that financial law is requesting that things happen 'as soon as technologically possible,' latency can no longer be ignored."
“As the Tabb Group's study concluded, readying technology platforms for financial regulation reform is more than just an exercise in compliance - it's a matter of survival for organizations that want to remain competitive in the OTC derivatives market," said Mark Mahowald, general manager, Ultra Messaging at Informatica which sponsored the report.
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