A few months back we put out a research piece on clearing technology, and how despite a lot of work over the past few years, a big investment is still needed to bring OTC clearing to where it needs to be. And thankfully for those that sell clearing technology, regulations and continued fear of counterparty risk will ensure that investment will in fact happen. The subtitle to the aforementioned report explains the shift in mindset: "Bringing the Back Office to the Forefront".
But one problem is that while the industry knows clearing and transaction volumes will grow, it is unclear by much. Kevin McPartland, an analyst at Tabb Group, the US capital markets consultancy, estimates transaction volumes could increase twentyfold, and market data volumes up to 3-4 times above the current levels.
“As volatility alone can cause rapid intraday deterioration of major counterparty credit quality, a move towards near-time or real-time clearing is inevitable anyway,” said Mr McPartland in a recent report. “OTC derivatives transactions that once took days to clear and settle will be finalised in minutes, if not seconds.”