Around the world, major financial institutions are pouring resources into upgrading trading systems and market infrastructure. Industry experts note that today’s market providers face growing complexity and volatility, “intensify(ing) the need to urgently modernise outdated infrastructure” to stay competitive.

Trading Infrastructure Modernization Is Underway

Many exchanges and banks are at a crossroads; as Deloitte’s 2024 outlook observed, “strategic choices they make now could determine whether they continue to grow—or even retain—market share”. In practice, this has meant big investments in new technology to make trading faster, more efficient, and more resilient.

Banks are actively overhauling both front and back-end trading operations. For example, in early 2025 HSBC inked a multi-year partnership with fintech firm Delta Capita to streamline its post-trade processes. The deal will deliver a new suite of global confirmation and settlement services for HSBC’s over-the-counter derivatives business. By tapping an Infrastructure-as-a-Service model, HSBC aims to automate and optimize trade confirmations, compliance (like KYC checks), and settlements. This kind of upgrade reflects a broader trend: market players replacing legacy systems (often decades old) with cloud-based and outsourced solutions to reduce cost and improve reliability.

Even exchange operators are moving core systems to the cloud; Amazon Web Services reported that numerous exchanges, clearing houses, and depositories deployed workloads on AWS in the first half of 2024 as part of this transformation). The CEO of Nasdaq, Adena Friedman, has said a thoughtful infrastructure upgrade “can unlock years of growth” – though she cautions it requires significant upfront investment in resiliency. Despite the challenges, the message is clear: modernize or fall behind.

Blockchain and Digital Assets Go Mainstream in Finance

Hand-in-hand with general infrastructure upgrades, many leading banks and exchanges have turned to blockchain and digital assets to reimagine trading and settlement. What started as experimental pilots a few years ago is rapidly becoming part of core strategy. Various mainstream financial firms are now exploring using blockchain in the trading and settlement of traditional assets. Major global banks – including those on Avaloq’s client roster like HSBC, Deutsche Bank, and Societe Generale – have all launched digital asset initiatives recently.

Some banks are focusing on tokenization and custody of digital assets. [(https://www.bankingdive.com/news/hsbc-digital-asset-custody-non-crypto-metaco-ripple-2024-bny-citi-state-street/699191/#:~:text=HSBC%20plans%20next%20year%20to,stablecoins%2C%20the%20bank%20said%20Wednesday)], for instance, is rolling out a new digital asset custody platform in 2024 to store tokenized securities (like bonds) for clients, complementing its “Orion” blockchain platform for issuing digital bonds. HSBC’s innovation chief for securities services noted “increasing demand for custody and fund administration of digital assets from asset managers and asset owners” as this market evolves.

Similarly, Deutsche Bank partnered with Swiss crypto firm Taurus to offer crypto and tokenized asset custody to institutional clients – the first time the German banking giant will hold cryptocurrency on behalf of clients. While Deutsche Bank is proceeding cautiously (actual crypto trading is not yet in scope), its securities services head Paul Maley emphasized the huge potential, saying the digital asset space “is expected to encompass trillions of dollars of assets” and will be a priority for investors and corporations.

He added that Deutsche Bank’s focus is supporting clients across the “overall digital assets ecosystem,” not just crypto speculation.

Even trading venues themselves are embracing blockchain. JPMorgan – often at the forefront of fintech – has been using a private blockchain network for interbank transactions for years, executing over $1.5 trillion in trades (like intraday repos and cross-border payments) since 2020. In late 2024, JPMorgan rebranded this platform from Onyx to “Kinexys” as it expands into on-chain foreign exchange settlement for multiple currencies.

Umar Farooq, the head of the initiative, explained the goal is to “break down disparate systems, enable greater interoperability and reduce the limitations of today’s financial infrastructure”.

In Europe, Societe Generale’s Forge unit issued digital bonds and even a euro-pegged stablecoin on blockchain, while the London Stock Exchange Group is developing a blockchain-based market for traditional assets. The common thread: banks and exchanges see distributed ledger technology as a way to achieve instant, secure settlement and to unlock new efficiencies across markets. As a Reuters report put it, multiple banks (Standard Chartered, BNY Mellon, SocGen, etc.) now offer crypto custody, and they’re openly talking about blockchain’s potential in mainstream finance. What was once the realm of crypto startups is now being led by household names in banking.

AI Arrives on the Trading Floor

Another tech wave sweeping through trading: artificial intelligence. In the past year, the world’s top investment banks have aggressively rolled out AI tools to their traders, bankers, and support teams. Goldman Sachs, for example, recently debuted an in-house AI assistant that it describes as “like talking to another employee”. The AI assistant – built with advanced large language models – has already been offered to some 10,000 Goldman staff and will expand firmwide, assisting with tasks from summarizing research to drafting code.

According to Goldman’s CIO Marco Argenti, the system will learn the firm’s processes and eventually take on more autonomous tasks, acting as a sort of super-smart colleague available on demand.

This trend isn’t limited to one bank.

All three of the world’s largest investment banks (Goldman, Morgan Stanley, and JPMorgan) have “aggressively” introduced generative AI tools to their employees. Morgan Stanley, for instance, has been using a GPT-4 powered assistant to help financial advisors retrieve information, and JPMorgan has invested in AI for risk management and trading strategy insights.

Exchanges and clearinghouses are also exploring AI for market surveillance (to detect fraudulent trading patterns) and to optimize trading algorithms.

The appeal is clear: AI can digest vast amounts of market data, news, and historical patterns far faster than any human, potentially giving traders an edge in decision-making and allowing operational staff to automate routine workflows. On trading floors, AI-driven analytics are now helping to fine-tune trade execution and manage complex portfolios in real-time. In the back office, machine learning models are streamlining clearing and settlement by predicting which trades might fail and automating exception handling.

While still in early stages, the cultural shift is underway – finance is embracing AI to augment human expertise. As one commentator quipped, the new gold rush is in “AI-powered finance,” and nobody wants to be left behind. The upshot for markets is likely to be greater efficiency and perhaps new trading strategies driven by predictive algorithms. However, it also raises the stakes for infrastructure: systems must handle AI’s intensive compute needs and the flood of data they generate.

This is yet another reason banks are upgrading tech – legacy systems were not built with AI in mind, whereas modern cloud-based infrastructures can scale on demand for these AI workloads.

Soaring Trading Volumes Test Market Plumbing

Behind all these tech initiatives looms an undeniable fact: global trading volumes have been surging, and legacy market plumbing is under strain. Recent years have seen record volumes across asset classes, underscoring the need for scalable, robust infrastructure. CME Group, the world’s largest derivatives exchange, reported a record average daily volume of 28.3 million contracts globally in Q3 2024, up 27% from the year prior. In some products (such as interest rate futures), activity was at all-time highs as investors flocked to hedge economic uncertainty. Volatility spikes have also led to massive single-day trading peaks – CME saw over 67 million contracts traded in a single day, a new record, in 2023. Stock exchanges and forex markets have likewise experienced huge turnover during turbulent periods. Each of these trades must be matched, cleared, and settled, placing enormous workload on exchange engines and post-trade systems.

Perhaps the most striking figures come from the clearing side.

DTCC, the U.S. clearinghouse backbone, processed approximately [$2.5 quadrillion (yes, quadrillion) worth of securities in 2022] (https://home.treasury.gov/system/files/261/FSOC2023AnnualReport.pdf#:~:text=,cleared%20daily%20by%20National).

That averages to around **$2.1 trillion in transactions cleared per day. These mind-boggling sums reflect just how much financial activity the “pipes” of the system carry.

When trading volumes spike – for example, during a crisis or a meme-stock frenzy – the stress on infrastructure is immense. Outdated systems can become bottlenecks or points of failure. (Notably, a few years ago the Tokyo Stock Exchange had a full-day outage due to a hardware glitch, and Australia’s ASX had to halt a blockchain-based clearing system project because it couldn’t handle the load.) With volumes only trending higher, the capacity and reliability of trading networks have become paramount concerns. Regulators, too, are pushing for risk reduction in the plumbing, shortening settlement cycles (U.S. markets are moving to T+1 settlement) and demanding better resiliency to avoid systemic issues. All this sets the stage for new approaches that can handle scale and eliminate single points of failure – which is exactly where Yellow comes in.

Yellow: Toward a Trustless, Planet-Scale Trading Network

While banks and exchanges fortify their infrastructure in incremental steps, Yellow.org and Yellow.com are leaping forward with a groundbreaking solution. Yellow is building a next-generation clearing network that aims to be infinitely scalable, trustless, and eliminate counterparty risk altogether – all while playing nicely with regulations. In essence, Yellow’s network is a decentralized clearing and settlement layer (often called a “Layer-3” network) that can interconnect trading venues across the globe. Using state-of-the-art blockchain technology (specifically state channels and smart contracts), Yellow allows trades to be executed and settled securely without relying on a central counterparty or custodian.

How does it work? The Yellow Clearing Network uses state channel protocols to open direct, high-speed payment channels between participating brokers and exchanges. Imagine every exchange and brokerage can transact with every other peer-to-peer, in real time, with cryptographic guarantees instead of trust. Orders from different platforms can be matched through Yellow’s network and settled via smart contracts that enforce the trades.

Critically, assets don’t have to be moved to a single centralized exchange – *Yellow enables real-time cross-chain trading without the need to bridge assets. This means traders can exchange value across different blockchains and markets seamlessly, all under the hood of the Yellow network. Multiple exchanges essentially share a unified order book through Yellow, aggregating liquidity that was previously fragmented.

A trade can be executed between two parties on different exchanges, and Yellow’s smart clearing ensures each side’s funds are locked in a smart contract and then swapped atomically. The result is instant, atomic settlement with zero counterparty risk.

Yellow’s design directly addresses the pain points traditional systems are grappling with. Counterparty default risk – a perpetual worry in centralized clearing – is eliminated because **exchanges on Yellow don’t hold users’ funds at risk; assets are held in secure multi-signature smart contracts until settlement. This trustless, non-custodial approach means no more fear of an intermediary going bust or misusing funds. It’s a stark contrast to the conventional model where participants must trust clearinghouses or each other (and as recent exchange failures have shown, that trust can be breached).

By removing the central custody, Yellow also potentially avoids the need for massive collateral buffers and default funds, while still guaranteeing trade completion. From a regulatory perspective, this is attractive: it reduces systemic risk and increases transparency (since all trades and collateral can be recorded on-chain), aligning with regulators’ goals of safer, more accountable markets.

Participants on the network are still known and vetted entities (exchanges, brokerages), so compliance checks (KYC/AML) can be enforced at the endpoints, keeping the network regulation-friendly.

Scalability is another cornerstone. Traditional clearinghouses can only process so many trades per second, but Yellow’s decentralized channel network can scale horizontally. The architecture is designed to handle extremely high throughput – potentially hundreds of thousands of transactions per second – by leveraging off-chain state channels for most activity.

In simple terms, Yellow only writes final settlement states to the underlying blockchain(s), while the bulk of order matching and execution can happen off-chain at lightning speed. This approach means that as trading volumes grow, the network can accommodate the load by opening more channels and nodes, rather than hitting a hard capacity limit. It is, effectively, infinitely scalable in the way the internet itself scales – by adding more nodes.

And because Yellow is an open network, it creates a level playing field: any compliant exchange or brokerage can plug in to access global liquidity, from major banks to upstart fintech firms.

In summary, Yellow is delivering what the industry increasingly realizes it needs: a “smart” clearing network for the planet’s markets – one that combines the real-time efficiency of blockchain with the robustness of modern infrastructure to remove risk and friction. Banks investing in blockchain, exchanges moving to the cloud, and firms adopting AI are all pieces of the same puzzle – they’re striving toward a faster, safer, more unified trading ecosystem. Yellow’s innovation brings those pieces together. By connecting siloed markets and enabling trustless cross-platform trading, Yellow addresses fragmentation of liquidity. By locking funds in smart contracts instead of centralized accounts, it tackles security and counterparty risk. By operating as a decentralized layer, it inherently provides resilience (no single point of failure) and scale.

Bridging Trends: From Finance 1.0 to Finance 3.0

The developments we’re seeing across global finance – cloud migrations, blockchain pilots, AI augmentation, record volumes – all point to an industry reinventing its foundations. The parallel rise of Yellow’s network shows how these trends can coalesce into a radically new market paradigm.

Think of Yellow as the backbone for an internet of markets: a network where value can flow as freely and securely as information does on the web. It’s a vision of market infrastructure 3.0 that learns from past limitations. Trust is established by math and code, not only by institutions. Scalability is achieved by decentralization, not by ever-bigger monolithic systems. And regulatory compliance is built-in via transparent smart contracts and identity-managed nodes, rather than after-the-fact reporting.

In making the trading world more efficient and safe, Yellow doesn’t seek to replace banks or exchanges – rather, it empowers them. A large bank upgrading its trading engine can integrate with Yellow to instantly reach more liquidity and ensure every trade it does is settled with finality. An exchange adopting AI for surveillance can leverage Yellow’s audit trail of smart contracts to better monitor transactions. In short, Yellow complements and accelerates the tech upgrades underway at incumbents by providing a unifying clearing layer beneath them. It’s a bold approach, but one whose time has come. As volumes grow and markets span from traditional stocks to digital assets, the old hub-and-spoke frameworks are creaking. Yellow’s timing, therefore, could not be better.

The pain points of market trading – fragmentation, latency, counterparty risk, operational complexity – are being tackled from different angles by banks and fintechs alike. But it is when these solutions are combined that the real breakthrough happens. Yellow’s next-generation clearing network is exactly that synthesis. It leverages the cutting-edge (blockchain, distributed networks) to solve age-old problems in finance, while enhancing – not disregarding – regulatory and institutional frameworks. In doing so, it draws a parallel to the broader industry trajectory: everyone is striving for safer, faster, more transparent markets.

Yellow is essentially offering the endgame of that quest, right now. As global market players continue to invest in modern infrastructure and technologies, Yellow stands out by addressing all of those needs holistically. It represents a new paradigm where trading can be trustless yet secure, decentralized yet compliant, and massively scalable yet efficient. The financial world is taking steps in this direction; Yellow is a giant leap.

In the coming years, as trading volumes break new records and digital assets blend into traditional portfolios, networks like Yellow’s could well become the backbone that knits the entire ecosystem together. A trader in New York could execute a transaction with an exchange in Singapore and a liquidity pool on Ethereum, all in milliseconds via Yellow – with no single party having to trust the other and no undue risk introduced. That is a future that benefits all players in the market. And it’s a future that, thanks to innovators like Yellow, is closer than ever to reality.