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Looking Beyond OTC Derivatives Regulations – Transformational Opportunities to create Competitive Advantage

Recent OTC derivatives regulations have fundamentally altered the market structure, processes and technology landscape of the OTC business. In addition, these reforms place significant emphasis on STP in trade life cycle processes, fully integrated data management and real-time processing capabilities for Buy and Sell-side firms.

Along with change in the market structure and transaction processes, these regulatory reforms have opened up new business opportunities. To support these opportunities and improve client services, firms must review their technology infrastructure capabilities. Such a review can eliminate redundancies and bottlenecks involved in operational processes, help realize technology differentiation opportunities and improve competitive advantage.

Importantly, complying with spate of regulations —notably, the Dodd-Frank Act, EMIR, REMIT, MiFID II and Basel III/CRD IV —requires a holistic approach. However, we have observed that due to looming deadlines and requirements uncertainties, organizations are inclined to adopt a tactical approach, addressing different compliance issues disjointedly. Such a fragmented response across business functions, products and geographies has led to process inefficiencies and increased compliance cost.

Along with the uncertainty and regulatory divergences on the coverage of products and entities across jurisdictions, lack of readiness of market infrastructure and ambiguity about market practices, market participants continue to grapple with basic operational issues while formulating compliance measures. In the absence of comprehensive planning, such an inconsistent and fragmented approach to drive technology enhancement significantly increases compliance costs and complexities.

Against this backdrop, a larger question looms for organizations — how do they effectively leverage on-going compliance efforts towards developing new business offerings, improved client services and reengineering optimized operational processes?

To develop business agility and differentiated capabilities on a sustained basis, a blue-print of a technology platform must be drawn up to re-architect the process landscape. By strategically aligning their compliance initiatives with transformational opportunities, firms can develop a competitive edge, while optimizing the cost of services and maximizing return on investment (ROI).

In this white paper, we discuss how firms need to harness transformation opportunities and develop a competitive edge in the face of recent OTC derivatives regulations.

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