For decades, the dominant question in capital markets was who could trade faster, price better, and access liquidity more efficiently than others.
High-frequency trading companies spent billions on reducing latency to microseconds. Investment banks built global distribution networks. The exchanges competed on volume and order flow.
That question is starting to matter less. Quieter competition has been brewing underneath, and companies that pay attention to it early may have the next lasting advantage in institutional finance.
Why execution is no longer the main competitive advantage
E-commerce systems have narrowed the information gaps that once separated market participants by years of infrastructure investment.
Liquidity is now fragmented across locations and asset classes in ways that make it increasingly difficult for a single firm to maintain an advantage solely through speed or order routing. In many market segments, quality of execution has effectively become a commodity.
The competitive focus is shifting deeper into the financial stack, into the systems that determine how assets are held, transferred, reconciled and settled between institutions after a trade is executed.
Custody architecture, settlement pathways, collateral mobility and post-trade processing – functions that were once treated as operational overheads – are emerging as the next layer of strategic competition in capital markets.
How infrastructure change is taking concrete form in regulated markets
A 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 agreement, 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 derivatives of shares of Alpha Bulgaria AD listed on the Bulgarian Stock Exchange, and the overall activated institutional portfolio exceeds $100 million. The structure reflects a pattern visible across markets: new infrastructure models overlay existing regulated frameworks rather than replacing them.
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This agreement follows a broader wave of institutional commitment to the modernization of financial infrastructure. BlackRock’s BUIDL fund surpassed $2.4 billion in assets by 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 the trading and settlement of digital securities, for which it is seeking regulatory approvals, according to an ICE press release.
What industry executives say is driving structural change
Wish Wu, CEO of Pharos, said the shift is already visible for institutions thinking about long-term positioning.
“Capital markets are increasingly moving from competition at the trading layer to competition at the infrastructure layer. Trading and execution have become highly efficient and, in many cases, heavily commoditised. The biggest strategic advantage now comes from control of 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 time before. 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 governing custody, clearing and settlement were created decades ago and rely on fragmented databases, multiple intermediaries and reconciliation processes that introduce operational costs and delays.
As the volume and complexity of assets flowing through these systems increases, the friction they generate becomes more visible and more costly.
In April 2026, the International Monetary Fund published a note arguing that the modernization of financial infrastructure is not a marginal improvement in efficiency but a structural reconfiguration of how capital markets work.
The Federal Reserve, the OCC and the FDIC issued a joint clarification in March confirming that the capital treatment of securities is technologically neutral, meaning that eligible securities receive the same regulatory treatment regardless of the infrastructure through which they are held or transferred, FinTech Weekly confirmed.
Companies that quietly build the pipelines through which capital markets pass may be positioning themselves to gain an advantage that trading speed could never have providedRoessler/Getty Images
The barriers that still exist between ambition and execution
Despite growing momentum, financial institutions face significant limitations in modernizing their infrastructure. Much of the global market structure is still based on systems that were never designed for real-time global coordination and that have been gradually patched over decades.
These systems are deeply embedded in 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 that the compliance dimension is as important as the technical one. “The biggest concern is operational and reputational risk. Institutions cannot move critical financial activities to systems that lack strong compliance controls, privacy protections, trusted governance, or institutional-grade security,” Wu added.
Jerald David, CEO of Lynq and former CME Group executive, framed the broader question of integration in terms of inevitability rather than uncertainty. “I don’t think it’s a question of if, but rather a question of how quickly,” David said.
He said that the dimension of risk management is what determines the pace. “If digital asset infrastructure is implemented poorly, overall risk can increase, so the next phase will be to implement these models in a way that truly reduces risk for institutions and their clients,” David added.
Key signs of infrastructure competition emerging in capital markets:
REAL Finance and Factori AD: EU regulated brokerage agreement activating an institutional portfolio exceeding $100 million; Factori AD retains compliance, KYC, AML and escrow; REAL Finance provides an infrastructure coordination layer; Pilot project includes Alpha Bulgaria AD equity derivatives on the Bulgarian Stock Exchange
NYSE infrastructure move: The NYSE announced the development of a platform for the trading and settlement of digital securities, seeking regulatory approvals starting in January 2026, according to ICE press release
Regulatory clarity: The US Federal Reserve, OCC and FDIC confirmed in March 2026 that the capital treatment of securities is technologically neutral, removing a key institutional barrier to infrastructure modernization, according to FinTech Weekly.
IMF Framework: The IMF’s April 2026 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: Securities Services Infrastructure Pioneers Could See Margin Improvements of 15-20%
What this means for investors watching institutional capital markets
Historically, the infrastructure layer of capital markets has 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 parties that determine operating cost, counterparty risk and, ultimately, the efficiency with which capital can be deployed and recovered across institutions.
As the competitive frontier in capital markets shifts from execution to infrastructure, companies that build, own and integrate these systems are positioning themselves to gain a form of advantage that is significantly harder to replicate than trading speed. Infrastructure incurs switching costs, generates recurring revenue from transaction flow, and increases 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 24-hour trading and clearing prompted incumbents, including CME and ICE, to develop similar capabilities.
The pattern, where infrastructure innovation by new entrants forces established players to modernize, is likely to repeat itself in the custody, settlement and asset management arenas in the coming years. For investors, the question is which companies are building the pipelines through which the next generation of capital markets will pass.
Related: Bessent and Powell send warning to Wall Street’s biggest banks
This story was originally published by TheStreet on May 22, 2026, where it first appeared in the Markets section. Add TheStreet as a preferred source by clicking here.
