For decades, the dominant question in capital markets was who could trade faster, price better, and access liquidity more efficiently than everyone else.
High-frequency trading firms spent billions reducing latency by microseconds. Investment banks built global distribution networks. Exchanges competed on volume and order flow.
That question is starting to matter less. A quieter competition has been building underneath it, and the firms paying attention to it earliest may hold the next durable advantage in institutional finance.
Why execution is no longer the primary competitive edge
Electronic trading systems have reduced informational gaps that once separated market participants by years of infrastructure investment.
Liquidity is now fragmented across venues and asset classes in ways that make it increasingly difficult for any single firm to sustain an advantage purely through speed or order routing. In many segments of the market, execution quality has effectively become a commodity.
The competitive focus is shifting deeper into the financial stack, toward the systems that determine how assets are held, transferred, reconciled, and settled across institutions after a trade is executed.
Custody architecture, settlement rails, collateral mobility, and post-trade processing, functions that were once treated as operational overhead, are emerging as the next layer of strategic competition in capital markets.
How the infrastructure shift is taking concrete form in regulated markets
One concrete example of this approach emerged on May 21 when REAL Technologies, parent company of REAL Finance, signed a securities infrastructure agreement with Factori AD, an EU-regulated investment broker.
Under the arrangement, Factori AD retains full responsibility for client onboarding, KYC, AML compliance, OTC execution, and segregated custody, while institutional asset flows are coordinated through REAL Finance’s infrastructure layer.
The pilot transaction involves equity derivatives of Alpha Bulgaria AD listed on the Bulgarian Stock Exchange, with the overall institutional pipeline activated exceeding $100 million. The structure reflects a pattern visible across markets: newer infrastructure models layered alongside existing regulated frameworks rather than replacing them.
More Wall Street:
This arrangement follows a broader wave of institutional engagement with financial infrastructure modernization. BlackRock’s BUIDL fund crossed $2.4 billion in assets in early 2026.
JPMorgan’s Onyx platform has expanded its institutional settlement capabilities. The New York Stock Exchange announced in January that it is developing a platform for trading and settlement of digital securities, for which it is seeking regulatory approvals, according to ICE press release.
What industry executives say is driving the structural shift
Wish Wu, CEO of Pharos, said the shift is already visible to institutions thinking about long-term positioning.
“Capital markets are increasingly shifting from competition at the trading layer to competition at the infrastructure layer. Trading and execution have become highly efficient and, in many cases, heavily commoditized. The bigger strategic advantage now comes from controlling the systems that handle custody, settlement, collateral movement, and asset servicing,” Wu said.
Several forces are converging to make post-trade infrastructure more strategically important than it has been in decades. Cross-border capital flows are expanding.
Private markets are growing. Institutional portfolios are more globally distributed than at any previous point. At the same time, regulatory expectations around transparency, reporting, and risk management continue to intensify.
These pressures are exposing the limitations of legacy post-trade systems. Many of the systems that govern custody, clearing, and settlement were built decades ago and rely on fragmented databases, multiple intermediaries, and reconciliation processes that introduce operational cost and delay.
As the volume and complexity of assets flowing through these systems increase, the friction they generate becomes more visible and more expensive.
In April 2026, the International Monetary Fund published a note arguing that the modernization of financial infrastructure is not a marginal efficiency improvement but a structural reconfiguration of how capital markets function.
The Federal Reserve, OCC, and FDIC issued a joint clarification in March confirming that the capital treatment of securities is technology neutral, meaning eligible securities receive the same regulatory treatment regardless of the infrastructure through which they are held or transferred, FinTech Weekly confirmed.
Roessler/Getty Images
The barriers that still stand between ambition and execution
Despite growing momentum, financial institutions face significant constraints in modernizing their infrastructure. Much of the global market structure is still built on systems that were never designed for real-time global coordination and have been incrementally patched over decades.
These systems are deeply embedded across custody, clearing, and reporting functions. Replacing them entirely would introduce unacceptable operational risk, making gradual integration the only realistic path for most institutions.
He said the compliance dimension is as important as the technical one. “The bigger concern is operational and reputational risk. Institutions cannot move critical financial activity into systems that lack strong compliance controls, privacy protections, reliable governance, or institutional-grade security,” Wu added.
Jerald David, CEO of Lynq and former executive at CME Group, framed the broader integration question in terms of inevitability rather than uncertainty. “I don’t think it’s a question of if, but how fast,” David said.
He said the risk management dimension is what determines the pace. “If digital-asset infrastructure is implemented poorly, overall risk can actually increase, so the next phase will be rolling out these models in ways that genuinely reduce risk for institutions and their clients,” David added
Key signals of the infrastructure competition emerging in capital markets:
- REAL Finance and Factori AD: EU-regulated brokerage arrangement activating institutional pipeline exceeding $100 million; Factori AD retains compliance, KYC, AML, and custody; REAL Finance provides infrastructure coordination layer; pilot involves Alpha Bulgaria AD equity derivatives on the Bulgarian Stock Exchange
- NYSE infrastructure move: New York Stock Exchange announced development of a platform for trading and settlement of digital securities, seeking regulatory approvals as of January 2026, according to ICE press release
- Regulatory clarity: US Federal Reserve, OCC, and FDIC confirmed in March 2026 that capital treatment of securities is technology neutral, removing a key institutional barrier to infrastructure modernization, according to FinTech Weekly
- IMF framework: April 2026 IMF note described infrastructure modernization as a structural reconfiguration of capital markets, not an incremental efficiency gain, FinTech Weekly confirmed
- PwC assessment: banks, asset managers, and corporate treasurers are actively building infrastructure positions across settlement, collateral management, and trade finance as tokenization moves from pilot to production
- Deloitte projection: early movers in securities services infrastructure could see 15 to 20% margin improvements
What this means for investors watching institutional capital markets
The infrastructure layer of capital markets has historically been invisible to most investors. Custody, settlement, and post-trade processing are not the parts of the financial system that generate headlines. But they are the parts that determine operational cost, counterparty risk, and ultimately the efficiency with which capital can be deployed and recovered across institutions.
As the competitive frontier in capital markets moves from execution to infrastructure, the firms building, owning, and integrating these systems are positioning themselves for a form of advantage that is significantly harder to replicate than trading speed. Infrastructure creates switching costs, generates recurring revenue from transaction flow, and compounds in value as more institutions connect to the same rails.
He pointed to what is already happening at the market structure level as evidence that this transition is not speculative. Hyperliquid’s success with around-the-clock trading and clearing pushed incumbents including CME and ICE to develop similar capabilities.
The pattern, where infrastructure innovation by newer entrants forces established players to modernize, is likely to repeat across custody, settlement, and asset servicing in the years ahead. For investors, the question is which firms are building the pipes that the next generation of capital markets will run through.
Related: Bessent and Powell send Wall Street’s biggest banks a warning
