The regulation-driven roll-out of clearing mandates is now complete. Would the platform operators’ hunger for profit lead them to exploit their position, for example by selling data, in a way that would turn the environment shitty? Drawing on parallels with the quality decay experienced by mature social media platforms (which are markets for content, right) – and a vulgar word innovation recently gone viral – Clarus Financial Technology’s Chris Barnes seeks the measures that could turn things back to better.

“We see ever increasing volumes traded in Rates markets, and yet constant concerns from market participants over liquidity conditions,” notes Chris Barnes – as the starting point for his blog post looking into the dilemma.

Admittedly disclaimed as “a tongue-in-cheek consideration of third-order risks in our markets”, Chris Barnes sets out to explore the hypothesis that a problematic trend in derivatives-market liquidity is in fact driven by “enshittification” – a process by which a centralisation, after first leading to positive network effects, is eventually exploited by the operator to a degree that triggers its decay into … well, shit, your reporter assumes.

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“Is ‘enshittification’ of social media akin to worsening liquidity conditions in financial markets as a result of increased rent-seeking behaviour of centralised platforms,” asks Chris Barnes, lining out evidence that this could indeed be the case. “[T]he roll-out of Clearing Mandates is now complete. Does this introduce a risk that platform operators start to turn to rent-seeking behaviours in order to achieve revenue growth? Potential signals of this behaviour would include platform operators increasing their focus on new services – selling data for example.”

Still, the writer notes rays of light and chooses to end on an up note of possibility:

“Is it time to move their goal-posts? Increasing liquidity provision could be the move toward ‘disenshittification’ that our industry needs.”