The volume of over-the-counter derivatives trades is threatening to overwhelm legacy clearing and settlement systems, according to State Street.

The global custodian bank warned that “significant investment” was needed to confirm, process and manage the risk of derivatives, which in many cases are still being serviced using technology designed to handle traditional equity and fixed income transactions. “It is crucial that the sell-side community, the financial services industry and regulators work together to develop new approaches to processing and servicing these complex transactions,” said Jay Hooley, president and chief operating officer of State Street.