The global securities industry has seen an increase in automation among certain areas, and the next two sectors that appear primed for greater automation are foreign exchange and derivatives, according to TowerGroup. The research group has also identified the geographic spread of automation, as emerging markets in Asia and Europe begin to close the gap with automation leaders in North America and western Europe.
Yet as automation continues its advance in front-office functions like trade execution, the efficiency of back-office functions like clearing and settlement is becoming increasingly mission-critical to overall market performance–as well as to the ability of individual brokerages to compete.
“Clearing and settlement have been unsung heroes in the securities industry,” said Dushyant Shahrawat, senior analyst in the Securities & Capital Markets practice at TowerGroup. “The back office tends to be the weakest link in the chain when it comes to advancing automation, even though it takes relatively simple levels of automation to hugely enhance the process.
While the U.S. now has this area under control, the fragmented state of clearing and settlement in Europe is currently one of the significant barriers to achieving a pan-European financial market.”