by Karen Gregory
The third annual event brought together representatives of central securities depositories (CSDs), central counterparties (CCPs) and exchanges for the weeklong event. Nearly 50 industry executives from Asia-Pacific, North America, Latin America and the Caribbean participated, with areas of expertise including clearing, audit and compliance, derivatives, risk management, custody, finance, human resources, research, strategy and legal.
“How do we navigate the ‘new normal’ market conditions and expectations for infrastructure?” asked Donald F. Donahue, DTCC chairman and CEO, in opening remarks to the group. “This continues to be a time of considerable challenge and renewed regulatory focus and scrutiny all around the world. The repercussions from 2008 continue to roll through the markets and, consequently, through our businesses. How do we in infrastructure organizations respond to these industry pressures?”
GREAT Participant Organizations
Here are the 20 infrastructure organizations represented at the 2010 Global Relations Exchange and Training (GREAT) Workshop.
- Barbados Central Securities Depository Inc.
- BM&FBOVESPA (Brazil)
- The Canadian Depository for Securities Ltd.
- CAVALI S.A. ICLV (Peru)
- Central Depository Company of Pakistan Ltd.
- Central Depository Services Ltd. (India)
- China Central Depository & Clearing Co. Ltd
- China Securities Depository and Clearing Corporation Ltd.
- Depósito Central de Valores S.A. (Chile)
- The Depository Trust & Clearing Corporation (USA)
- Hong Kong Securities Clearing Company Ltd.
- Japan Securities Depository Center Inc.
- Japan Securities Clearing Corporation
- Korea Exchange
- Korea Securities Depository
- National Securities Clearing Corporation Ltd. (India)
- National Securities Depository Ltd. (India)
- Taiwan Depository & Clearing Corporation
- Taiwan Stock Exchange Corporation
- Vietnam Securities Depository
On the agenda
New this year was a roundtable discussion comparing different models for asset services, clearing and settlement through a matrix compiled by DTCC from information supplied by each participating organization. (The idea for the matrix came from a prior year’s delegate; each year, conference participants work with DTCC to enhance the workshop’s agenda.)
Another first was the GREAT Gallery Walk, in which participants and DTCC colleagues circulated among 20 exhibit tables – each hosted by a participating infrastructure – to introduce themselves, distribute information and answer questions.
Panel discussions and breakout sessions were structured to maximize opportunities to share experiences and best practices, and identify potential areas of collab-oration.
Topics covered included trends in the structure of the global financial markets, risk management, the new regulatory environment, technology and customer relations. Also on the agenda were sessions dedicated to specific areas of the industry, such as over-the-counter derivatives, asset services, fixed income clearing and settlement, wealth management and insurance services. In addition, the delegates visited the New York Stock Exchange for a tour and presentation.
“GREAT is a team effort with many of our partner CSDs, CCPs and exchanges,” said Mary Ann Callahan, DTCC managing director, Global Relations and Devel-opment. “We enjoy planning and scheduling this program with them long before their representatives arrive in New York in July. We all learn so much from one another during this week together, especially by sharing our experiences and insights. Each year, we find that contacts and discussions that begin during GREAT continue through the year and beyond.”
The subject of risk – operational, credit, liquidity and systemic – was present throughout the conference.
One executive likened risk management to a moving target, which requires the constant strengthening of risk systems. Another posed the question whether today’s financial market participants really understand the risks they face. She noted that, today, infrastructure organizations need to assess the risks posed both by day-to-day operations, as well as by the possibility of extraordinary events that may impact the marketplace. “Coupled with that, we face a changing landscape because of the re-regulation of the markets and the globalization of investments,” she said. “We cannot act in isolation when it comes to risk management.”
One conference participant talked about his organization’s concerns about data leakage and unauthorized transactions. “Our Code of Corporate Governance helps mitigate these risk factors, and we have a legal framework whereby there is a separate account for each investor,” he noted.
Another said that, because his organization operates through a beneficiary model, it must identify the final beneficiary of every transaction. “Our risk-management framework includes a comprehensive risk analysis of an individual’s risk profile and margin calls at the individual account level,” he commented.
A panel on Asset Services included a discussion on corporate actions. “One of the industry’s biggest sources of risk is corporate action processing, and transaction fees don’t reflect this,” said Janet Wynn, DTCC managing director, Global Relationship Management, who moderated the discussion.
Now, numerous infrastructure organizations are taking measures to reduce risk in corporate actions through further standardization and straight-through processing. For example, DTCC, SWIFT and XBRL US recently issued a business case to improve corporate actions, with recommendations that call for, among other things, a single set of global standards to bring greater accuracy, reduced risks and lower costs by improv-ing transparency and communication between issuers and investors.
Another session focused on settlement cycles and whether there should be a movement to shorten them. While the idea is attractive in some respects, most attendees held that there were too many obstacles to overcome, including the number of parties, time-zone differences and current practices.
In Latin America, for example, Peru and Brazil are on a T+3 cycle, while Chile is T+2. In Asia, Hong Kong, India, Korea, Pakistan and Taiwan are T+2; Vietnam and Japan are T+3; and China is T+0 for bonds, T+1 for A Shares and T+3 for B Shares. North America is T+3.
An overview of the U.S. regulatory, compliance and governance environment was given by William Jannace, Financial Industry Regulatory Authority (FINRA) managing director in charge of Sales Practice Policy/Member Regulation.
“The dialogue that took place during the panel discussions and breakouts was collaborative and energetic, but some of the best exchanges of ideas and experiences came during the informal networking,” said Lisa Argento, DTCC director, Global Relations and Development. “These are the discussions that set the stage for collaboration in the future.”
William Aimetti, DTCC president and COO, closed the workshop. “May you remember your week here as a time of discovery and exploration and deeper understanding of our industry,” he said. “And may you also remember it as a time of new and rewarding friendships.” @