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Deutsche Bank charts ‘Amazonisation’ of securities post-trade

A newly-published white paper issued by Deutsche Bank – ‘Transitioning into the future of securities post-trade’ – evaluates the progress of harmonisation initiatives for post-trade securities settlement and explores what needs to be done to bring processes in line with modern expectations.

A standardised interface for investors, coupled with uniform rules and regulations, are needed for the post-trade industry to make the leap to operating at the same level as Amazon, the paper argues.

“Post-trade has undergone an extensive revamp in the years since the financial crisis of 2008,” says Emma Johnson, director, regulatory and market initiatives, Deutsche Bank Securities Services and co-author of the white paper.

“However, we need to ask if it’s taken us far enough towards the efficient and transparent system we need. While Amazon can fulfil orders the same day they are made, securities still take two days to be credited to the beneficiary. Participants are rightly calling for this gap to be bridged.”

Barriers to progress

Europe’s TARGET2 Securities (T2S) initiative – the new securities settlement engine which aims to offer centralised delivery-versus-payment settlement in central bank funds across all European securities markets – as well as the Eurosystem’s planned consolidation of T2S with Target2 (T2), are paving the way to some extent.

Yet there are also remaining barriers to a harmonised post-trade industry, notes the report. These include the cost of investing in new infrastructure and the existence of country-specific implementation that create an uneven playing field.

“Embracing T2S harmonisation is just the first step,” adds Johnson. “We must also look at renewing the regulatory agenda to further increase transparency while accounting for new participants and new technologies.

“Without standardised laws, rules and practices devised with today’s market in mind, the industry will have to continue settling for the status quo. Establishing these standards, and driving necessary tax and securities law reform, will provide the keystone for a new and improved post-trade landscape that can compare with the likes of Amazon in the retail industry.”

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