Those within the derivatives execution space believe the area is suffering from a lack of knowledge of late due to cost cutting measures, reports a new whitepaper from Acuiti.
While 28% of respondents believe the derivatives industry has experienced a ‘significant’ loss of expertise over the past decade, 33% cited a ‘moderate’ loss, and just 13% stated that expertise levels had increased.
The ‘sell-side execution management insight report Q2 2025’ highlighted that “multiple network members” had reported that “staff with detailed knowledge of many legacy systems and processes are narrowing down, principally because of lay-offs”.
Specifically, 29% of respondents believed ‘cost-cutting measures’ to be the main contributing factor towards the loss of expertise, with 21% asserting that it is ‘training and development,’ closely followed by consolidation of firms (17%) and retirement of experienced professionals (13%).
The research body explained that, with the expertise leaving the building with these individuals, some vital knowledge on how to work and even fix legacy systems when they go down is also lost.
“Members also pointed the finger at over regulation which they said is killing entrepreneurship and innovation,” added Acuiti.
“[…] Outsourcing and the attraction of cryptocurrency markets, to which many sell-side veterans have moved, were also blamed.”
When it comes to the empirical consequences of this loss of expertise, almost half (43%) highlighted ‘overdependence on legacy architecture’ whilst 30% pointed to ‘a lack of innovation’, and the rest putting it down to ‘greater operational vulnerability’.
Read more: Euronext’s Charlotte Alliot on what’s next for the derivatives space
Elsewhere, Acuiti pointed to other topics of the moment, including back-to-back execution agreements with specialist liquidity providers, which the research body reported are becoming increasingly common across the industry, with the prevalence of such agreements highest among tier 1 banks.
In terms of back-to-back execution use, the most common asset class was equity derivatives, with other notable use in fixed income, credit, energy derivatives and commodity derivatives.
Speaking about the overall derivatives execution business performance from their respondents in 2024, Acuiti explained that “most of the network reported a positive 2024, with majorities saying it had been better than an average year, 2023 and budget […] North American firms reported a better year than other regions, but good performance was generally strong across geographies.”