Recently, I joined a panel of industry leaders to discuss the impact of the pandemic on industry trends, the potential for disruption and the bigger picture of what’s happening in securities finance. Hosted by Josh Galper, Managing Principal at Finadium, the “Tech, Ops and Market Structure in Securities Finance” also included Darren Crowther, General Manager, Securities Finance and Collateral Management, Broadridge; Raj Sheth, CEO, Pirum; and Tom Poppey, Co-Head, Global Securities Lending, Brown Brothers Harriman.
Working Remotely – What’s Working and What Isn’t
The hour-long webinar kicked off with a few words from each panelist about how our respective companies have transitioned to employees working remotely.
All panelists reported that while there were individual challenges and certainly effects on the family, the technology and the infrastructure was, for the most part, in place to support employees during these extraordinary times. And in the small instances were some of the infrastructure struggled in the beginning – remote connectively, collaboration over WebEx, etc. – those technological challenges have since been resolved.
I was able to share that at DTCC, we were not surprised by the remarkable lack of disruption, even in the face of unprecedented market volatility. We have practiced and prepared, and we had a solid business continuity plan in place. As a critical market infrastructure, we have a responsibility to seamlessly execute for the industry and provide stability to the markets and the financial system by ensuring that no matter what happens, day in and day out, we have the capacity to seamlessly handle daily trading volumes. That responsibility was especially put to the test by nine days in March that exceeded the 2008 peaks and transaction volumes that grew from $380 billion to $477 billion. There was a massive amount of activity going through our systems, but we managed it without disruption because of DTCC’s robust clearing and settlement infrastructure.
Re-Evaluating Tech Priorities
Turning attention to the question of technology investment spend, and if COVID-19 had forced any reevaluation of technology dollars across our firms, panelists reported there really had been no need to reevaluate priorities. The only shift for DTCC, that I shared with the panel, was perhaps in some short-term investments in various communication tools and collaboration platforms to further ease the transition to remote work.
But in terms of our big projects and budget, there hasn’t been a reevaluation of our technology spend because our major efforts have a solid, thoughtful business case behind them. We continue to invest in modernization opportunities to strengthen the industry’s post-trade processes.
That sentiment aligns with our SFT Clearing project, for which we will continue developing a common interface and formats throughout 2020. This new model for central clearing of equities lending and borrowing transactions will leverage our clearing capabilities, risk management and efficient infrastructure to provide the market with a bilaterally cleared stock loan service. We believe central clearing of equities SFTs has the potential to expand capacity for clients by significantly enhancing market access, while at the same time, mitigating pricing pressures through counterparty risk reduction in the bilateral securities lending market.
Opportunities for Securities Finance CCPs
I cited for the panel and the webinar attendees two new DTCC case studies that advance efforts to evaluate new ways to enhance post-trade processes through the digitalization of assets. The case studies – Project Ion and Project Whitney – are the latest efforts by DTCC to examine the potential use of distributed ledger technology (DLT), asset digitalization and other emerging technologies. Project Ion seeks to build on DTCC’s successful efforts over the past several years to further optimize the settlement process in the public markets, while Project Whitney considers opportunities to provide increased levels of digitalization throughout the private market asset lifecycle.
Whitney is an acknowledgement that private markets are ripe for digital infrastructure and tokenization while Ion is an assessment if DLT can accelerate settlement, and the potential benefits for both cash and securities. The Ion Proof of Concept is intended to test this business value and determine if we have community backing.
We won’t do tech for tech’s sake, but where the technology offers value. And technology is only valuable if our community of users adopts -- and so we need the community to come along.