Top 4 Capital Markets Trends for Exchanges in 2024

Written By: Magnus Almqvist, Head of Sales at Exberry

January 18, 2024

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2023 represented a challenging year manoeuvring against persistent inflation, higher interest rates and geopolitical tensions. Widely forecast to affect capital markets in 2024 is a slowing global economy, as well as the potential risk of the global economy entering into recession resulting in softened economic demand.

It is against this backdrop that market infrastructure firms find themselves up against competition like never before. In order to succeed against these challenges, exchanges need to ensure they are meeting customer expectations by diversifying their offering. Exchanges also need to examine how they can make use of innovative technologies in order to gain competitive advantage.

I thought it would be helpful, therefore, to highlight some of the main trends that will affect exchanges in 2024, and how markets can take advantage of these, including modernisation of technology, new markets and innovative asset classes.

Top 4 Capital Markets Trends in 2024

1. Retail Trading

The evolving landscape of national stock exchanges now places significant emphasis on retail participation. Brokers observe a clear trend as individuals, even if not directly trading on the exchange, prefer well-known platforms over niche alternatives. This paradigm shift prompts questions about how exchanges like Eurex can adjust their marketing to attract retail traders.

Furthermore, the growing influence of retail traders, driven by a mix of professionals and enthusiasts seeking excitement, is reshaping market dynamics, underscoring the need for exchanges to adapt to this changing landscape.

2. Digital Assets

The recent approval by the SEC for spot Bitcoin ETFs marks a pivotal moment for digital assets as an influx of institutional and retail investments into the asset class is expected, thus enhancing the legitimacy of digital assets at the same time. Tokenisation is poised to dominate pilots for digital assets at regulated firms, particularly for bonds. Further, the UK’s upcoming tokenisation regulatory sandbox could eventually mean secondary markets for tokenised financial instruments.

In the world of central bank digital currencies (CBDCs), it seems jurisdictions are finally turning their digital currency plans into reality. Spain is testing a wholesale CBDC, and Kazakhstan has now launched the digital tenge. The advent of CBDCs holds the promise of catalysing innovation in financial services, not least in shortening settlement cycles and thus reducing investment costs and risks, promoting economic growth and resilience on a country-by-country basis.

3. Artificial Intelligence (AI)

Some prominent exchanges are examining ways to employ AI to enhance anti-crime measures, leveraging predictive capabilities for swift identification of criminal behaviour. Collaborating with banks and exchanges, the software aids in reducing and managing threats across the sector.

The Financial Stability Oversight Council, composed of leading financial regulators, acknowledges that AI could drive innovation and efficiencies in financial institutions. However, the fast-paced evolution of technology demands ongoing vigilance from both companies and their regulatory overseers.

4. Race to the cloud

Big cloud providers have made their inroads into financial market infrastructure: Nasdaq partnered with Amazon, and Google invested $1 billion in CME Group for advanced cloud infrastructure. Microsoft invested £1.5 billion in London Stock Exchange Group (LSEG) for analytics and cloud.

Subsequently this past autumn, Aquis Stock Exchange became the first recognised investment exchange (RIE) to run a cloud-based matching engine, and the LSEG streamlined their operations by running Oracle Fusion Cloud and Oracle Financial Services Applications on a singular, unified platform. Expect to see an increasing number of exchanges transitioning to cloud in 2024.

Adaption is critical

In the face of navigating challenging shifts to the economy, exchanges are at a critical juncture. Adapting to trends, such as retail trading, digital assets, AI and cloud, is crucial for exchanges to thrive amid intensifying competition and evolving market dynamics.

Data, Cloud, and AI: The Future of Capital Markets

In a world where there’s increasing awareness around spending tech stack budgets – efficiency and agility have become a lifeline for capital markets firms. But where do organisations start in terms of understanding how the transformative forces of innovation can best serve their interests?

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