Perspectives & Key Themes from Operations Professionals

We hosted our Operations Conference & Exhibition, with insights into top-of-mind topics for operations professionals. Inside this note, we recap just some of what was seen and heard, including:

• Operations & Technology: Markets have undergone significant transformations, including transitioning to T+1 settlement and diversification of portfolios with new products such as ETFs and digital assets. Technology and data play crucial roles in enhancing market efficiency, with firms looking at integrating AI to streamline tasks and improve productivity. Digital assets are gaining traction amid evolving legislation, offering opportunities for embedding KYC and AML processes into blockchain and enhancing efficiency in extended trading hours.
• More on markets: Panelists emphasized the need for a technical, data-driven approach to equity market regulations. We review extended trading hours, high CAT costs, and sub-dollar stocks. Treasury clearing deadlines are set for December 2026 for cash Treasuries and June 2027 for repo markets, requiring collaboration across multiple business lines.
• Economic update: Markets started the year with optimism. Uncertainty around tariff policy reversed market sentiment, creating volatility. The U.S. economy, previously near-perfect, faces challenges with the tariff impacts, though productivity and AI could help avoid a recession, particular as we reach the final state for tariffs.
• Regulatory roundup: The conversation around deregulation continues as the industry seeks to balance investor protection and market integrity while fostering innovation and growth. Regulatory agencies are reviewing rules to ensure they are appropriately scaled without compromising investor protections.

Executive Summary

Operations and technology: The markets have undergone significant transformations in recent years, including the successful transition to T+1 settlement and the impending Treasury clearing deadlines. Investors are diversifying their portfolios with new products like ETFs, short-dated options, and digital assets, while also incorporating private market assets alongside public ones. Extended trading hours for equities have progressed more rapidly than expected, reflecting the dynamic nature of market structure changes. Liquidity is following these opportunities, leading to record trading volumes across asset classes amidst elevated volatility due to trade policy uncertainties.

As a result, investors’ needs are evolving, requiring faster data and integrated tools for real-time risk monitoring. Operational resiliency remains crucial, as failure by a major market participant could have significant industry-wide impacts. The adoption of new technology and innovation, when executed responsibly, helps mitigate risk and enhances market efficiency. Technology innovation must be done under the regulatory umbrella and cannot solve all problems. Firms put the needs of their clients first, then build the technology around that. This section expands further upon new technologies and the intersection with operational resiliency when developing a technology strategy.

We also review the importance of data. Data is essential for identifying issues, informing solutions, and driving progress. It’s a crucial aspect of technology strategy, providing value through operational efficiencies and innovations. With the surge in data generation, firms must manage and leverage clean, structured data to improve speed to delivery and ensure accessibility. Aligning data with business goals enables informed decision-making and better utilization of technological advancements.

Specific to select technology areas, the discussion on artificial intelligence emphasized integrating AI into corporate strategies rather than having separate AI strategies, highlighting the importance of enhancing employee productivity through AI tools. AI can streamline tasks such as digitizing loan documents and eliminating settlement fails, thus empowering employees. A KPMG survey noted significant growth in AI usage, with daily productivity tool usage increasing to 58%, weekly knowledge assistant usage up to 61%, and Gen AI embedded in workflows at 35%. Looking ahead, AI agents are expected to become prevalent in 2025, fundamentally shifting AI’s role from providing insights to taking actionable steps in workflows.

As to digital assets, the rapid changes in legislative and regulatory environments are creating opportunities for firms. With presidential executive orders and Congressional bills focused on stablecoins and various financial regulatory bodies like the SEC, OCC, Federal Reserve, and CFTC engaging in dialogues, firms are opening up to identifying tangible use cases for digital assets. These includes embedding KYC and AML processes into blockchain, achieving rapid collateral movement, and improving efficiency in extended trading hours. The cost savings and immediate benefits of these technologies justify their adoption and investment, enabling digital assets to integrate seamlessly with traditional financial processes.

Finally, we look at the progression of accelerated settlement outside of the U.S. The UK and EU are targeting October 2027 for their T+1 settlement transition, with the process being more complex in Europe than in the U.S. given numerous CCPs, exchanges, and CSDs. Australia and Singapore may delay their accelerated settlement efforts until after 2027. Additionally, operations teams should make note that the UK and EU’s accelerated settlement will coincide with U.S. Treasury clearing changes.

More on markets: The U.S. equity markets are highly efficient, and recent regulations proposed or enacted have been met with criticism, as they were driven by a vision to change market structure rather than addressing any specific law, incident, or market failure. The current administration under Chair Atkins is expected to adopt a more technical and data-driven approach to rulemaking, open to industry comments. Panelists discussed various aspects of market structure, including the need for a measured approach to new regulations, the potential benefits of extended trading hours, and the high costs and inefficiencies associated with the Consolidated Audit Trail (CAT). Additionally, the growth in exchange-listed stocks trading below one dollar raises concerns about investor protection and market distortion, suggesting that many of these stocks should be traded over the counter instead. Panelists also addressed specific recently adopted regulations, such as improvements to Rule 605 disclosures for increased transparency, updates to tick sizes and access fees, and the inclusion of odd and round lots in the SIP, which enhances market clarity. However, there was caution regarding the broad inclusion of stocks in the reduced tick size, which could negatively affect liquidity in stocks that are not truly tick constrained.

The mandate to central clearing for the Treasury market represents a significant shift aimed at eliminating counterparty credit risk and enhancing financial stability. The implementation deadlines are set for December 2026 for cash Treasuries and June 2027 for repo markets. Multiple business lines, including operations, legal, and risk teams, must collaborate to ensure a smooth transition. While market participants are already progressing, with cleared volumes at FICC reaching $11.4 trillion in April, several issues remain unresolved. These include the scope of international entities subject to clearing requirements, double margining concerns for money market funds, and the treatment of mixed-collateral triparty transactions. Additionally, the debate on the clearing model – whether done-away or done-with clearing – continues, highlighting the need for flexibility to accommodate different capital structures and business models.

Economic update: Markets started the year with optimism, driven by U.S. exceptionalism and strong economic performance. However, uncertainty around tariff policy reversed market sentiment. The uncertainty stalls business investment and raises concerns around economic growth, or dare we say recession. The process also elevated volatility and created a roller coaster of a ride for equity markets in April.

U.S. consumers – the engine of economic growth for the U.S. and economies globally – had been resilient. There are signs of slowing, even in the top 40% based on income. The U.S. economy, previously near-perfect, faces challenges with the tariff impacts, though productivity and AI could help avoid a recession. The final state of tariffs is expected to be lower by year-end, easing global trade uncertainty and potentially fostering growth.

Regulatory roundup: The conversation around deregulation continues as the industry seeks to balance investor protection and market integrity while fostering innovation and growth. Regulatory agencies are reviewing rules to ensure they are appropriately scaled without compromising investor protections. Operational resiliency remains crucial, with firms encouraged to prepare for various scenarios, including cyberattacks, and to include critical vendors in their exercises. Monitoring third- and fourth-party vendors is vital due to the interconnected nature of the financial system.

In market discussions, regulators acknowledged the need for an extended timeline for Treasury clearing to address unresolved issues and allow new clearing houses to enter the space. The industry is working on standardized documentation, clearing models, and systems upgrades. For extended trading hours in equity markets, questions remain about defining the trading day, supervisory structures, and systems setup for round-the-clock trading. Investor disclosures will be essential due to differences in overnight trading conditions.

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Author

SIFMA Insights
Katie Kolchin, CFA
Managing Director, Head of Research

Related Resources

• Event

  2025 Operations Conference & Exhibition