Tensions in Post-Trade I: the big picture

I recently spoke at Market360 in London, looking at some of the trends and tensions I see in the post-trade landscape. In this blog series, I am going to share some of the things I talked about at the conference.

So, to start with the big picture. This year marks the tenth anniversary of one of the most defining events for financial services in recent memory. Ten years ago, we were approaching the peak of what has now become known as the Great Financial Crisis, epitomised in particular by the collapse of major financial institutions like Lehman Brothers and Bear Stearns.

Over here in Europe, this crisis originally linked to US sub-prime mortgages morphed into a sovereign debt crisis, which has led to widespread austerity measures and significant underemployment and unemployment in Europe.

Shockwaves of this event are still being felt today, most obviously in the continued low interest environment in which we have operated over the past decade, and also in the long-term quantitative easing measures we've seen governments around the world take as a method of shoring up their faltering economies.

On interest rates, it seems now we’re entering into a period of divergence between major economies. In the US, the Fed has been slowly increasing its federal funds rate as a result of improved labour market conditions, greater optimism about the recovery strength and confidence that inflation was moving back to its 2% target over the medium term. It’s likely this will continue going forward. The ECB meanwhile has kept its key policy rates unchanged - with the main refinancing rate at 0%, the marginal lending facility at 0.25% and the deposit facility rate at -0.4% - so as to sustain a very substantial degree of accommodation.

Crisis in the developed economies of the West has also obviously led to an increasing visibility of other emerging economies, notably China – with an obvious sign being the inclusion of the Chinese RMB in the IMF SDR reserve currency basket with a weighting of 10.92%, the 3rd highest weighting after USD and EUR.

This is just a quick overview of some of the macro trends – but there's more to it than this. Our reactions to the Financial Crisis, as countries, as companies and as individuals, have very much shaped the story of the last decade, particularly along three key dimensions: regulation, austerity, and technology. Over the next few blogs I'd like to spend some time going over some of these themes, which I see as having been significantly influenced over the past 10 years by the 2008 shock, and then move onto what they might mean for tomorrow.

Part two: Regulation since Pittsburgh

Part three: Austerity and populism