The Top Three Needs for Operational Resilience in Derivatives Markets: Takeaways from FIA IDX 2024

Blogs / Conferences & Events / by: Andy Jennings / June 26,2024

FIA IDX celebrated its 16th year in London last week and revealed an industry that was much like the previous year’s edition: dealing with continued global turbulence, racking up impressive volume numbers, and facing the challenge of perpetual regulatory expansion. Conference attendance was strong and a general feeling of optimism prevails but there are a number of challenges being addressed.

Here are a few takeaways from the event:

  • FIA CEO and Chairman Walt Lukken kicked off the event with remarks that used song titles as a framing device. Derek and the Dominoes, Marvin Gaye / Tammi Terrell, Thomas Dolby, Robert Johnson / Cream, and Adele (possibly) all got shout-outs as Lukken focused on some of the key issues facing the industry. Of particular interest were results from a newly released report from Acuiti and FIA that found that 53% of market participants believe that regulatory burdens are the biggest challenge for the derivatives business over the next five years. On top of that, 40% do not believe that EU regulations are proportionate to the risks of their activity. 
  • An audience poll conducted during the “Operations of the future in a digital world” also delivered some interesting stats. When asked to name the main areas of post-trade processing that require attention, the evergreen areas of allocations, give-ups, and average pricing (57%) were followed closely by data standardization / lineage (52%). While the former has received great attention through the work of DMIST, the latter has not. Data will require much more attention.
  • A second question in the poll asked which technologies will have the biggest impact on operational efficiency and cloud (20%) and low-code / no-code (20%) were dramatically overshadowed by AI (61%). No surprise there but, as is common so far, practical and market-ready AI solutions are in short supply, particularly for the back office.
  • In Europe and the UK, conversation about regulation is generally followed by even more conversation about regulation and 2024 is no exception. The EU EMIR REFIT began in April, the UK EMIR REFIT comes at the end of September, and DORA becomes fully operational in January 2025. With the EMIR REFIT, the number of reportable fields increases by over 57%, from 129 to 203 (204 in the UK) and DORA is a whole other matter, dramatically expanding requirements for operational resilience in ways that are new and unique. 
  • Given the survey results on data standardization and focus on increasing regulatory requirements, it should come as no surprise that operational resilience is at the forefront of objectives for many of the panelists. The DORA regulations mandate resilience and are going to put a microscope over best practices and bring to light the real world implication and risk of monitoring “important and critical” third party service provided for the regulated financial institutions. DORA can be viewed in essence as regulation by proxy of the financial technology service providers. We will have to wait until Q3 to begin to fully understand the effort and lift required. 

Responding to the Challenges

Whether it’s responding to regulations like EMIR REFIT and DORA, fulfilling the promise of AI, or boosting operational resilience the top three needs are data, data, and data. When it comes to meeting new and complex reporting requirements, ensuring the reliability of operations, or extracting reliable and consistent results from AI operations, data must be of the highest quality. There is no doubt that regulatory requirements will increase, just as it is certain that advances in AI will have profound impacts across nearly all areas of business. The best thing to do now is concentrate on making sure that all of your data is maximized to the greatest extent possible. This is a primary focus for BornTec for 2024 and beyond.

Andy Jennings is Director of EMEA for BornTec, a technology solutions firm that provides tools to support surveillance, risk, compliance, and regulatory reporting functions in financial markets. Contact us to learn more.