Financial market infrastructure companies poised for strong 2024 performance, Fitch Ratings affirms

New Delhi [India], December 2 : Global financial market infrastructure companies (FMIs) are anticipated to maintain robust financial performance in 2024, according to Fitch Ratings.
The neutral outlook is driven by resilient business models, an increasing share of recurring non-volume revenue, and the overall adaptability of FMIs to market fluctuations.
Key insights indicate global exchanges will thrive on diversification into non-trading domains such as data and analytics, along with strong derivative trading volumes and a predicted modest rebound in IPOs in 2024.
While operational risks persist, tied to integration challenges from past acquisitions and the ongoing shift to cloud technology, Fitch expects certain global exchanges to deleverage in the coming year as synergies from recent acquisitions materialize.
Clearing houses are anticipated to face heightened counterparty credit risks in 2024, influenced by macroeconomic pressures on counterparty credit profiles.
However, this is expected to be mitigated by prudent margining practices and strengthened default waterfalls defining the priority of financial resources in case of a clearing member's default.
Regulatory advancements, including margining requirements and capitalization, will further support the credit profiles of clearing houses.
International central securities depositories (ICSDs) are foreseen to benefit from robust net interest income in 2024, leveraging an expected prolonged period of higher interest rates.
Despite operational challenges stemming from international sanctions and a shortened settlement cycle, ICSDs' sound risk management, operational capabilities, and solid profitability and capitalization are projected to mitigate potential risks.
In emerging markets, FMIs are expected to experience a stable operating environment in 2024. While profitability may encounter pressure due to adverse regulatory changes, especially in Latin America, Fitch deems such challenges manageable.
FMIs in emerging markets typically boast high credit ratings, reflecting resilient business profiles, consistent performance across economic cycles, and limited direct exposure to sovereign debt.