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30 August 2015

TABB Forum: Trends resulting from the regulatory-driven changes to the markets

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The combination of the Dodd-Frank Act, EMIR, MiFID II and Basel III signify the biggest regulatory changes in decades. These reforms resulted in major changes in how financial products are traded, settled, collateralized and reported, resulting in deep structural changes to the markets.

· Sell-side exits bring new buy-side business opportunities: This change can create new business opportunities for technology providers and third-party risk managers willing to help put those reforms in place. On the buy side, as certain business lines become uneconomic for sell-side players, hedge funds and others can step in to do those transactions.

· Quest for higher yield: On the investor side, new regulations, coupled with slow economic growth and central bank intervention, are making yield hard to come by.  As investors consider their options, alternative investments are gaining ground. These investments are riskier, and sometimes more exotic, but promise the returns investors are hoping for. However, as investors shift over to actively managed funds, they will need best-of-breed analytics and new technologies to effectively monitor and risk manage their portfolios. As they adopt these technologies in-house, investors also demand the same of the managers they invest with. In order to adapt, managers will have to be able to show how they actively monitor investments through enhanced disclosures and other technology enabled analytics.

· Technology transforms margin challenges into opportunities: Regulation-imposed changes in market practices call for sophisticated analytics and superior operational capabilities. The buy side is turning to new technology to give firms a complete, front-to-back view of their global collateral assets to allow them to assess multiple sourcing and funding options in real time.

· Technology trends: Leading investment managers are examining integrated front-to-back systems that provide a complete solution for analytics, trading and risk. The trend is to optimize and streamline the entire workflow, to ensure greater trade transparency and enterprise-wide reporting.

· Systems Rethink: Improvements in the technology available to fund managers are enabling this kind of total systems rethink within organizations.  In order to take full advantage of this enhanced technology, the buy side will have to take into account key consideration, including cross-asset, multi-strategy support; integrated analytics, trading and risk platform; robust risk management and control; low total cost of ownership (TCO).

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