Blueprint for Migrating Derivatives Post-Trade Processing to a Cloud-Native Environment

Authors: Prashant Singh

DOI: https://doi.org/10.37082/IJIRMPS.v9.i2.232561

Short DOI: https://doi.org/g9q396

Country: USA

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Abstract: Rapid changes and advancements in international financial markets have resulted in the substantial growth of the derivatives market and the number of transactions that take place, and therefore, the post-trade domain emerged as a key area for reformation. Derivatives post-trade processing has traditionally been supported by legacy on-premise systems, which lack standardization, are highly complex, and expensive to support. These legacy systems cannot keep up with the demands of today's financial institutions for real-time access to data, operational risk, and stringent regulatory requirements. However, with the rise of cloud-native technologies, we have game-changing opportunities to overcome these challenges with scalable and strong mechanisms that are also cost-effective. By doing so, firms can simplify  operations, lower cost structures, increase agility, and better respond to market dynamics and regulatory change.
This article is a blueprint for an integrated approach to take the derivatives Post Trade Processing (PTP) to a cloud native model. The research paper contextualizes and highlights the challenges of legacy systems, while identifying the forces motivating financial services companies on their journey towards cloud transformation. Review of the literature: Summary of industry consensus on how the cloud benefits the industry and regulations that the industry has to consider. The paper follows with a comprehensive step-by-step methodology developed to lead organizations through the stages of the cloud migration process, from assessment and design to application modernization, data migration, testing, and deployment, and constant optimization. Further, the results and discussion sections offer insight into anticipated business and operational benefits and feature early adoption case studies of top financial institutions that have moved to the cloud.
The study also examines some key issues, namely security, compliance, change control, and supplier management, and provides suggestions to address these. The blueprint aims to help financial organizations to ensure that they make the transition in a controlled manner and with minimal risk, while operating as normal and in accordance with regulation. In the end, the paper suggests that adopting cloud-native designs for derivatives post-trade processing is less of a chance to do things better and more of an existential necessity given the history and future of the global financial markets. Meanwhile, if the cloud is adopted as the technology of the future, it will be a better place to capitalize on innovation, operational resiliency, and cost optimization in the long run as the technology matures. The results and conclusions of this paper are supposed to be a valuable manual for banks and other financial firms interested in this critical change.

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Paper Id: 232561

Published On: 2021-03-05

Published In: Volume 9, Issue 2, March-April 2021

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