Exchanges, clearing firms to face growing disruption

Securities trading venues, clearing firms and other financial market infrastructure players are likely to face increased competitive and innovation challenges in the year ahead, according to a new report from Fitch Ratings.

The rating agency said it has a neutral rating outlook on the global financial market infrastructure sector for 2022, as the economic recovery solidifies and firms’ leverage declines.

The sector also faces the prospect of increased disruption from growing competition and technological change, Fitch noted.

These factors should also help sustain M&A demand at the largest global infrastructure firms, it said.

“Large global exchange groups will continue to execute on operational integration and de-leveraging plans following recent transactions,” said Evgeny Konovalov, director at Fitch, in a release.

“National exchanges in emerging markets will benefit from increased retail participation in financial markets, although this may be partially offset by weaker sentiment from foreign investors as a result of rate increases in major economies,” he said.

Fitch said it expects international securities depositories to remain focused on organic revenue growth in their core businesses and in secondary revenue streams, such as fund distribution, settlement and data.

“The evolving regulatory environment could be credit positive for clearinghouses,” it noted, as measures such as bank resolution requirements take effect in Europe next year, and policy-makers mull the possible introduction of central clearing obligations in the U.S. Treasuries market.

“LIBOR transition may change competitive dynamics among clearinghouses, but Fitch expects leading clearinghouses to largely retain their market shares,” it said.

James Langton

James is a senior reporter for Advisor.ca and its sister publication, Investment Executive. He has been reporting on regulation, securities law, industry news and more since 1994.