Financial markets operations: evolution, divergence and innovation

  • Rollo Burgess & Thomas Hill
  • 15 July 2025

While no one would rebuild a ship while at sea or refit an airliner in mid-flight, financial services firms do not have the luxury of implementing their preferred operating models in dry dock or aircraft hangar – rather, they must do so while continuing to engage with and respond to a dynamic and complex environment. Successfully meeting those challenges while also advancing towards a target future requires clear awareness and focus, both of the destination and how it relates to the current landscape. 

To kick off our new series of articles exploring the path ahead for financial markets Operations, we will look at the factors that constrain and contextualize the evolution of Operations functions, before reviewing common key priorities that should inform firms’ current plans and initiatives, and then considering the key themes that we believe will characterize the future of Operations.

 

Industry drivers

The key contextual factors at an industry level affecting Operations functions’ change priorities can be grouped into three broad categories – regulatory change and divergence, market modernization, and product innovation. 

 

Regulatory change & divergence

Following the global financial crisis, regulatory reforms around the world have followed a common template of approaches: 

  • capital and liquidity regulation (with overall direction set by the Basel Committee on Banking Supervision)
  • market infrastructure change –including clearing, transaction reporting, timeliness of confirmation and post trade processing
  • a developing controls landscape (manager accountability regimes, standards of data management).

However, we are now in an environment where aligned approaches cannot be assumed –and where the likelihood of active divergence is material. 

Given this level of uncertainty and the potential for contrary directions of travel between key regions, Operations functions need to prepare to support inconsistent regulatory environments within global functions. This will be an operational challenge even where deregulation or pro-growth measures may be seen as advantageous for firms overall. 

To address this new reality, Operations teams need to build for agility and flexibility: investing in systems to support data management and analytics, in staff skills, training and tooling, and collaborate effectively with other functions.


Market modernization

Modernizing market process and conventions both demands and promotes investment in operational process efficiency and automation. Examples of high-profile drivers at present include the move to T+1 settlement in North America and now in the UK and Europe, and the application of clearing mandates into new product areas – for example, US Treasuries (already underway) and early discussions in respect of UK Gilts. 

Less discussed, but perhaps ultimately more impactful, will be the steady extension of trading hours as markets move towards ‘always open&rsqufo; models, such as 24X approval in the US and 24/5 trading being discussed for Nasdaq).

Some might question the rationale for a number of these moves, but these trends are real and sustained. Collectively, they will require investment in process efficiency and re-engineering of core platforms to support new market conventions. 

Understanding the needs of clients and supporting them through this evolution of the markets is a competitive challenge requiring a client-centric mindset from Operations staff. The destination should be a maximally automated middle and back office, with Operations teams focused on managing and optimizing client experience and ensuring the robustness of platforms and processes through change.

 

New products and services

Innovation around financial products and services will continue as new technologies and market dynamics propel product adoption. Operations functions should be in active dialogue with business and commercial teams, industry bodies and others about changing requirements to support such new products. 

Examples of product categories which Operations may be asked to support at industrial scale include: 

  • DLT based assets and tokenized securities
  • Synthetic Risk Transfer instruments
  • various private market investments. 

Firms should implement clear support models and SLAs for the management of emerging instrument categories, with a product maturity view to support new low-volume products in tactical mode, supplemented with appropriate compensating controls and management focus, plus a roadmap to establish longer term platforms subject to agreed criteria. 

It is also appropriate for Operations functions to monitor and engage with industry initiatives aiming to provide collective resources to address to shared challenges. These initiatives may address existing problems (for example, handling of widely used static data or performance of middle office processes) or offer solutions to handling of new products, much as the DTCC’s Trade Information Warehouse and confirmation middleware did in respect of rapidly growing CDS markets during the 2000s. 

Such initiatives are numerous and do not always succeed, so picking winners is hard. However, the firms that navigate this landscape most effectively are those that make it an explicit focus and establish a strong partnership between Operations, sales and trading teams and strategic investments groups to ensure swift and robust decision-making, with all the right stakeholders fully engaged.

Key considerations and takeaways

In a period characterized by uncertainty across multiple dimensions – regulatory, market structure and product – we should not try to predict the future. 

However, many of the challenges that Operations functions are likely to face will both demand and be mitigated by investment in automation and efficiency, the leveraging of new technological possibilities, the upskilling of staff and being thoughtful about future demographics and staffing needs, and through active dialogue with internal and – crucially – external stakeholders.

In our next article we will review how major sell-side institutions are meeting these challenges. 

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