As lawmakers in the U.S. and Europe continue working on financial re-regulation legislation, DTCC has expanded its external outreach efforts in Washington, D.C., and Brussels to help shape the policy debate and educate stakeholders on the company’s role in protecting the stability of the global capital markets.
Over the past year, DTCC executives, led by Larry Thompson, managing director and general counsel; Peter Axilrod, managing director, New Business Development; and Stuart Z. Goldstein, DTCC managing director, Corporate Communications and Public Affairs, have been meeting with members of Congress and regulators to explain DTCC’s role in providing safety and soundness through its clearance and settlement services in the equities and fixed income markets and expanding support in the over-the-counter (OTC) derivatives market.
"Our primary concern in Washington is understanding how re-regulation will impact our member firms and describing how the infrastructure can be leveraged in this re-regulatory environment to further enhance market transparency and mitigate systemic risk," said Thompson. "We’re giving voice to critical issues facing the industry and working with policymakers on solutions that support the goals of re-regulation and will also help the industry meet new regulatory mandates in the most efficient, cost-effective and expeditious manner possible."
Although this effort marks the first extensive external affairs program in the company’s history, DTCC has quickly established itself as a respected and trusted resource for lawmakers on Capitol Hill because the company is market-neutral, operates at-cost and has no commercial interests. Many legislators have turned to DTCC in recent months as they try to get their arms around the complex financial issues in the re-regulatory debate and formulate reforms of the nation’s securities laws.
DTCC also is making its voice heard on several areas of the re-regulatory debate that directly affect its operations. These include proposed regulations for OTC derivatives, which could impact MarkitSERV and the Trade Information Warehouse, and policy changes in Europe that will impact EuroCCP and DTCC’s other initiatives overseas.
"The decisions being made by lawmakers and regulators in the U.S. and Europe today will have a profound impact on the financial services sector for many years," said Axilrod. "It is critical for DTCC to be actively engaged in these governmental discussions so we have the opportunity to express our opinions on legislation before Congress."
DTCC recently hired Andrew Douglas, an industry veteran with more than 20 years of experience in the global securities industry, as Head of Public Affairs in Europe to communicate the company’s overseas policy agenda and strengthen relationships with key individuals and groups in government. Douglas, who spent the past decade representing SWIFT in Europe with government, regulatory and institutional officials, is working with DTCC senior executives Diana Chan, CEO of EuroCCP; Stewart Macbeth, DTCC managing director and general manager, Trade Information Warehouse; and William Stenning, DTCC managing director, Business Development, Deriv/SERV, on a wide range of issues currently under debate. These include interoperability among CCPs and the value of a single central global repository per asset class for the derivatives market.
"The global nature of the capital markets, combined with DTCC’s increasingly global role in the marketplace, requires us to have a strong presence on the ground in Europe representing our interests," Douglas said. "Like the U.S. Congress, the European Parliament is working diligently on a new set of regulations to govern the financial industry that will have far-reaching implications for market participants as well as DTCC. What’s more, at some point in the not-too-distant future, regulators will need to harmonize new laws in Europe and the U.S. to ensure consistency across global markets."
An essential element in raising DTCC’s profile in Washington, D.C., and Brussels has been a proactive public affairs campaign that has positioned the company to play a key role in the re-regulatory debate. The program is designed to raise awareness of DTCC’s role in financial services, enhance its reputation and reinforce the brand globally. It includes extensive briefings with editors and reporters covering financial re-regulation, authoring position papers and other written communications to inform legislators, and developing media and legislative strategies. For instance, Donald F. Donahue, DTCC chairman and CEO, published an op-ed in the Financial Times on May 4, 2010, that explains the value of trade repositories and underscores the importance of regulators having unfettered access to data. (See article, page 15.)
In addition, DTCC recently coauthored with Lightbulb Press a Guide to Clearance and Settlement, a book that describes the company’s clearance, settlement and risk mitigation services in a way that is accessible, readable and user-friendly – the plain-English explanation of what happens after the trade. The book was distributed to every member of Congress to broaden understanding of DTCC’s role in protecting the capital markets. (The book is available for purchase on Amazon.com.)
"The challenge of communicating broadly to public policymakers and educating them about DTCC underscores the close relationship between media relations and public affairs," said Goldstein. "A strategic and creative approach to public affairs is essential in raising awareness among stakeholders of DTCC’s long history of providing certainty, stability and reliability in the financial markets – and essential to our long-term success in Washington, D.C., and Brussels."
DTCC’s top legislative goal in both the U.S. and Europe is advocating for language that writes into law a requirement that all OTC derivatives trades – both cleared and non-cleared – be reported to a single trade repository per asset class.
Legislation that passed the U.S. House of Representatives and the Senate only requires the reporting of non-cleared trades. The two bills are now going to a Conference Committee and must be passed by the House and Senate before going to President Obama for signature.
While this process will likely play out over the next several months, DTCC’s external affairs activities will actually increase after the new law passes. That is when the rule-making process begins, a critical three-to-five-year span during which regulators will promulgate new rules to govern the operation of the financial markets.
"This period will dramatically alter the regulatory landscape," Thompson said. "As busy as we have been in Washington, D.C., and Europe recently, DTCC will need to further expand its outreach over the next five years during this re-regulatory environment as policymakers focus on issues related to systemic risk and regulatory oversight." @
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