The global financial ecosystem stands at a critical inflection point. Markets are transforming at an unprecedented pace, driven by both an extremely complex operating environment and the significant opportunities arising from accelerated technology innovation, writes Magnus Haglind, head of marketplace technology at Nasdaq.
The legacy systems that have served as the backbone of trading and settlement operations for decades are increasingly showing their limitations in the face of new market demands. These systems, often relying on outdated technology stacks, struggle to handle the complexity of modern market activity. The result is a fragmented landscape of siloed solutions, manual processes, and technological debt that impedes efficiency and innovation across the entire trade lifecycle.
In the face of extreme and persistent spikes in volume and volatility, modernising trading and post-trade infrastructure is now an urgent necessity for market operators. Financial institutions that fail to keep pace with these developments risk being left behind in the relentless pursuit of global liquidity and market share.
Drivers of change
The increasingly complex operating environment is driven by a continuous wave of evolving investor expectations, more intense regulatory oversight and market reforms, and a shifting competitive paradigm. Collectively, these factors are placing an extraordinary strain on market operators’ underlying architecture.
Firstly, recent periods of volume and volatility serve as an important reminder on the need for robust and flexible architecture. The demand for resiliency also comes from an increasingly diverse group of market participants with the rise of retail trading placing greater focus on capacity throughout the system. The digital revolution has accustomed consumers to seamless, instantaneous experiences in every aspect of their lives.
These expectations have naturally extended to financial services. Today’s investors demand 24-hour access to markets, transparent pricing, immediate trade execution, and frictionless post-trade processes including rapid settlement and efficient asset servicing. Meeting these expectations in all scenarios requires a fundamental rethinking of the entire market infrastructure ecosystem.
Secondly, we are in the later stages of implementing regulations constructed in response to the global financial crisis, which have placed significant demands on market infrastructure at every stage of the trade lifecycle. Regardless of whether future regulations strengthen or relax certain requirements, compliance changing rules will always require resilient architecture alongside sophisticated data management capabilities and reporting functionalities that legacy systems struggle to provide. Future regulatory changes will only increase these demands, particularly in post-trade processes where real-time risk management capabilities and transparency throughout the trade lifecycle are paramount.
And finally, cloud, AI, DLT, and advanced data capabilities have revolutionised what is possible across the financial system, empowering operators to expand their services, enter adjacent markets, and create new revenue streams through enhanced data and analytics.
However, these advancements have simultaneously lowered barriers to entry, allowing nimble new competitors – without legacy solution constraints – to challenge established players without the significant capital investments previously required. Traditional market operators now face competition not just from their historical peers, but from fintech disruptors, global technology platforms, and even their own participants who can leverage these accessible technologies to establish new venues.
How operators must respond
Market operators are forced to solve for complexity across multiple dimensions, but addressing these challenges also represents a huge distraction effect at a time management teams must also focus on growing their business and ensuring the long-term competitive position. The heart of the solution lies in a fundamental mindset shift in the way market operators approach their modernisation program.
Legacy infrastructure is so deeply embedded in organisational processes that the incremental connection of disparate systems has now reached a level of risk that it warrants a close and continuous dialogue between boardrooms, internal technology leaders and strategic technology partners. Market operators increasingly realise that technology must elevate their modernisation program and view it as a critical enabler of their core strategy across all aspects of their business.
Many are therefore beginning to pursue a fundamental shift in their operating model, seeking a path to modernisation that both accelerates and de-risks their modernisation strategies, drawing advanced toolkits and third-party models to augment in-house expertise.
The adoption of a services delivery framework will significantly enhance market operators’ modernisation efforts, enabling faster time-to-market for new releases and bolstering overall resilience. This model transforms fixed capital expenditures into scalable operational expenses, providing an agile technology stack and globally standardised services and workflows, so employees are empowered to drive business development and innovation.
Adapting to new realities
Market operators that successfully modernise their end-to-end platforms will be positioned to capture new opportunities, expand their service offerings, and deliver superior value to their clients. Furthermore, they must also take steps to modernise their broader ecosystem to capitalise on the community-wide benefits of common market infrastructure. Those that delay will find their markets and ecosystems increasingly constrained by technical limitations, vulnerable to disruption, and unable to meet evolving regulatory requirements and market demands.
The future of financial markets will be defined by speed, flexibility, and connectivity across the entire trade lifecycle. Only those infrastructure providers that fully commit to modernising both trading and post-trade capabilities, reimagine their operating model, and advance their broader ecosystem will be able to deliver the seamless, efficient, and resilient services that tomorrow’s markets demand. The choice is clear: elevate your modernisation strategy and de-risk your operating model now, or risk falling behind in an increasingly dynamic and competitive landscape.