2024: Looking Back / Looking Forward

Blogs / by: Derek Haworth / January 08,2024

By nearly any measure, 2023 was a momentous year for the derivatives and trading industries. While higher interest rates led to a realignment of trading strategies and stimulated what is certain to be a record year for trading volumes, other events had tremendous impacts on the industry as well. Turning the page on the calendar is always a good time to reflect on the year that just passed and to take a look ahead to see what might lie ahead in the New Year. Here are three items that caught our attention last year along with some thoughts on what they might mean for 2024 and beyond.

From Ransomware to Resilience

The trading industry got a wake-up call last year when third-party solutions provider ION Markets was hit with a ransomware attack in late February. Some firms were reduced to manual workarounds, slowing processing and raising risk, while others halted activity with select counterparties as the mess was sorted. While such an occurrence had long been discussed the actual event revealed many gaps in processes and other vulnerabilities that needed to be addressed. The Futures Industry Association (FIA) acted quickly to pull industry resources together to produce a comprehensive plan for future action and much more work needs to be done by all parties to increase resilience in their operations. With the EU’s Digital Operational Resilience Act (DORA) slated to be fully implemented by this time in 2025, firms can ill afford to let up in their efforts to automate, digitize, and rationalize their operations. 

BornTec’s take: read our blog post “What’s the ‘Equation’ for Operational Resilience?” to learn more.

Regulation HEATS up

If ransomware weren’t enough, the industry is also facing a seemingly unending rise in the tide of regulation. While exchanges like ICE and the CME are increasing their oversight, in some cases issuing penalties that can rise well into six-figures, the most explicit and direct instance of increasing regulation came from the CFTC. In October, the agency announced a new regulatory stance that closely hewed to the “Heightened Enforcement Accountability and Transparency (HEAT) Test that was first promulgated by Commissioner Christy Goldsmith. The CFTC promised to be more selective in their “neither admit nor deny” approach by seeking more admissions of guilt while simultaneously examining whether or not enforcement penalties were high enough, particularly in cases where firms or individuals committed similar or exact acts in the past. Taken together, resilience and regulation point to a need for firms to tighten up their processes or else pay the price.

BornTec’s take: we took a look at the stricter regulatory line taken by the CFTC in our LinkedIn article, “Bringing the HEAT”.

AI – Always and Everywhere?

You would have to be living under a rock to not recognize how generative artificial intelligence (AI, for short) became the most talked about topic ever since the introduction of ChatGPT in late 2022. It can almost seem that AI stands for “All In” as firms search for ways that they can take advantage of this hot, new trend. There’s a danger in this type of approach, however, as the technology takes precedence over business needs in a proverbial “hammer looking for a nail” scenario. While generative AI will undoubtedly transform nearly every aspect of business operations over time, application should be considered carefully at these early stages. It often makes more sense to focus on the fundamentals of normalizing and codifying data for achieving both short term gains and setting the stage for better results as AI and other technologies are deployed. 

Gartner has tracked “generative AI on its Hype Cycle™…..since 2020…..and the technology has moved from the Innovation Trigger phase to the Peak of Inflated Expectations.”

Looking back / looking forward with BornTec

For BornTec, 2023 was a banner year as we added new features, expanded our product offering and more than doubled our customer base. The new year promises more innovation and expansion as we continue our focus of delivering exceptional efficiencies for the back office and compliance operations for active trading entities across multiple asset classes. We look forward to being a trusted partner as our clients face an increasingly complex and daunting trading and regulatory landscape. Contact us to learn more.