In the last few years, the financial markets have undergone dramatic change. While some of this is down to natural evolution, much of the change can be directly attributed to new rules introduced in the wake of the 2007 crisis.

In the last few years, the financial markets have undergone dramatic change. While some of this is down to natural evolution, much of the change can be directly attributed to new rules introduced in the wake of the 2007 crisis. Regulators, legislators and central bank governors have been determined to avert another bubble bursting or an unexpected event that could threaten markets. Lawmakers have targeted key financial practices for reform, radically altering the expectations and behavior of industry participants. . The combination of the Dodd-Frank Act, European Markets Infrastructure Regulation (EMIR), MiFID ll and Basel lll signify the biggest regulatory change in decades. These reforms have resulted in major change to how financial products are traded, settled, collateralized and reported, resulting in deep and ongoing structural changes to the markets.

There is no doubt that these new rules are directly impacting buy-side firms — be they asset managers, hedge funds, insurance companies or pension funds. But while the changes have certainly brought challenges, they have also brought opportunities.  Firms that can proactively evaluate structural and operational dislocations in the marketplace and tailor business models to leverage the opportunities while addressing the challenges will be in the best position to stand apart from their competitors.  Revised business models call for revisions to supporting processes and systems.  Buy-side firms should look to re-architect their processes and technology infrastructure, with a goal to strengthen risk control and oversight, enhance transparency and improve efficiency of front-to-back office control functions.

The credit crisis, and the regulatory response it spawned have fundamentally reshaped financial markets for buy-side firms. But while the changes have brought about challenges, they have also ushered in opportunities. The key to success will be the speed with which firms are able to understand the changing marketplace and adapt their business models to align with the changes.

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