SIX released its benchmark analysis into the expectations of senior executives leading the global financial industry, the Future of Finance. It reveals that – in the context of changing market conditions – confidence has returned strongly to financial institutions across the globe since the last study.
Confidence amid market uncertainty: There has been a significant uplift in positivity, both in expectations for the broader economic environment and in organizations’ own positions for growth. At the same time, there is an acknowledgment that the world has changed, with barriers to international trade viewed as the biggest potential challenge. While there is broad agreement that market uncertainty is now a long-term feature, senior executives are divided on whether to see this as an opportunity or a challenge.
Fostering wider capital market participation: There is a view that exchanges should focus on improving liquidity to encourage more retail investors into the market. European respondents back a range of different measures their domestic exchanges could take to improve liquidity. These include focusing on niche or emerging sectors and facilitating a greater availability of ETFs. Senior executives see post-trade innovations as the main way to boost institutional secondary market trading.
The changing nature of regulations: Senior executives are responding to the shift to T+1 in the EU, Switzerland, and the UK in different ways, though collaboration is central to many organizations’ preparations. Regulatory fragmentation is seen as a potential barrier to the EU achieving its goals with the Savings and Investments Union. Further, developments in the international sanctions environment are widely predicted to impact companies from an operational perspective.
Data demands during volatility: This feeds through to a prediction that regulatory and compliance data will be the dataset seeing the biggest rise in spend. Every respondent also experienced data-related challenges during the tariff-driven market volatility earlier this year, ranging from inconsistency to issues with data volume and quality. Private markets are perceived to be underdeveloped from a data perspective, while fixed income lags behind its traditional asset counterparts in terms of real-time data availability.
C-suite confidence
The survey showed that over two-thirds (69%) of C-suite executives at financial institutions across the globe expect the economic environment to improve for their organization over the next 12 months – up considerably from 53% last year. The findings come after benchmark equity indices rallied to record highs this year in regions including the US, UK, Germany, Singapore, Switzerland, while those in Hong Kong and Spain also rose to near all-time highs.
Singaporean and Swiss respondents are the most confident of their organizations’ position for growth, with 75% and 63% considering it strong, respectively. C-suite executives at US financial institutions report the lowest levels of confidence in their own organizations’ positions for growth, with only 43% seeing their position as strong – the only market to score less than 50% on this measure.
Practically all (99%) of executives agree that heightened market uncertainty will be a long-term feature of the global economy. However, in terms of how to view this uncertainty, respondents are far more divided. Overall, 58% see this as more of an opportunity, while 41% view it as more of a challenge.
In terms of the greatest challenges facing respondents, barriers to international trade and capital flows are the most cited, with 36% identifying these as their chief concern. The other two challenges most commonly flagged are reluctance among investors to take risks and geopolitical uncertainties. The latter has cropped up as one of executives’ main concerns in three of the last four Future of Finance studies.
“The ability to adapt to change defines successful organizations. While geopolitical conditions have evolved since our last study, respondents’ determination to succeed remains strong,” said Bjorn Sibbern, CEO SIX, in a statement. “Managing market volatility requires reliable infrastructure and efficient flows of high-quality data. Working with trusted and innovative partners enables organizations to leverage uncertainty as a driver of growth, not merely a risk to manage.”
T+1: automation vs. throwing bodies at it
Despite recent recommendations made by the European Securities and Markets Authority (ESMA) that market participants should pursue automation ahead of the shift to T+1, rather than solely relying on tactical changes, 40% of firms report they are preparing by transferring or hiring staff in different regions. Improving communications with counterparties to prevent trade disputes is the top preparation method for both asset management organizations (43%) and wealth managers (54%), while investment banks appear to be prioritizing strengthening collaboration with custodian banks and clearing partners (52%). The findings highlight the importance of industry-wide co-operation. Asset servicers, meanwhile, are focused on tactical staffing measures (53%).
Responding to what they see as the biggest challenge for implementation, nearly a third (30%) of global respondents point to securing resources for system and process upgrades. Lack of process automation ranks lowest (20%), with findings from a previous Future of Finance study providing a possible explanation. In the 2023/2024 study, conducted in the run-up to the US shift to T+1 settlement, 47% of senior executives felt the main consequence of the switch would be an opportunity to automate processes, suggesting that many market participants may have already undergone automation projects.
Rafael Moral Santiago, head of Securities Services at SIX, said in a statement: “The upcoming shift to T+1 settlement in the EU, Switzerland, and the UK presents unique challenges compared with the US last year. There is no single solution when it comes to preparation, so strong collaboration is vital given the complexity of multiple jurisdictions moving simultaneously. Regulators, market participants, and central securities depositories must work in sync to fully realize the benefits of T+1 settlement.”
Daniel Carpenter, CEO of Meritsoft, a Cognizant company, said in a statement: “Without a thorough review and a real push toward automation, firms who simply add headcount to address T+1 will see a permanent cost increase and margin erosion. T+1 does not end in October 2027 but continues every day after that, and has effectively already started. Automation is the only way to address a shorter settlement cycle efficiently, without negatively affecting investor returns.
“Collaboration and close communication between counterparties will be key to prevent trade and settlement disputes. Everyone along the trade lifecycle needs to understand how T+1 will impact their processes. From the asset manager to the broker to the custodian bank then CSD, one weak link can have knock-on effects on the rest of the market.”