While the addition of clearing for FX OTC products brings greater complexity to the FX back office, the re-engineering exercise that is underway across the industry is also looking to improve processes and streamline post-trade architectures at the same time. Furthermore, the increased complexity that clearing brings is also likely to spur a new wave of outsourcing, or use of ASP models, for processing as well as the newly emerging reporting requirements, which could, in effect, simplify the FX back office.
Nick Dyne, managing director of MarkitSERV's FX business, considers the next round of developments as Step 2 in the evolution of STP, where Step 1 provided the basic "plumbing" post-trade delivery of transactions from venues to clients and counterparties. He says: "The basic delivery of messages from execution venues to post trade destinations is, today, heavily commoditised; and the process is now largely outsourced by the major venues to third parties. For most clients now, STP connectivity is a prerequisite of the core service offered by trading venues. As such, what was originally a first-mover advantage has become a last mover disadvantage, so the question now is how do competing execution venues differentiate the post execution experience to establish first mover advantage again?"