by Helen Cunningham
Risk, regulation and global political and economic uncertainty were the predominant topics at DTCC’s 2011 Executive Forum, a day-long conference attended by 125 executives from across the industry. It was the fourth year DTCC sponsored the forum, which brings together customers, industry experts and DTCC executives to share insights about industry issues and trends.
“This annual event allows us to gather for a day to reflect on major developments impacting the industry and its infrastructure,” said DTCC’s Corporate Chief of Staff Paula Arthus. “It is a valuable forum for customers to connect with their counterparts across the industry, including DTCC’s senior team, to share ideas and best practices for managing the ever-evolving roster of challenges and opportunities we face. The forum also allows DTCC to put forward its vision for fully leveraging the infrastructure to meet the industry’s needs – and to highlight some of DTCC’s key accomplishments in doing so.”
The theme of this year’s event, held October 24 in New York, was “Driving Vital Insight.”
The panel discussions brought together a cross-section of industry executives and experts who gave their views on topics including how the industry is moving to implement Dodd-Frank legislation; the evolving role of regulators; the imperative of risk management in today’s environment; and how DTCC partners with other organizations to create innovative ventures that serve customers.
The day opened with a thought-provoking keynote address on the global political and economic environment by Ian Bremmer, president of the Eurasia Group and author of the acclaimed book “The End of the Free Market: Who Wins the War Between States and Corporations.” Noting that the world’s architecture is in a state of flux, Bremmer talked about the high level of volatility and the “absence of global governance” – and said it is still too soon to know how it will play out. He also said the massive structural volatility has created new ways of thinking about global risk.
A featured speaker on the Dodd-Frank panel was Rep. Jack Kingston (R-GA), who is the House Agriculture Appropriations Subcommittee Chairman. Kingston talked about the need for an ongoing exchange of ideas and information between the industry and legislators. The luncheon speaker Bethany McClean, a financial journalist and book author, gave her perspective on trends and drivers in global capital markets.
A closing panel, consisting of DTCC Board members and moderated by Robert Druskin, DTCC Executive Chairman, discussed issues such as the potential impact of regulation on innovation, the need for regulatory coordination across jurisdictions and how the concentration of transactions in central counterparties creates both efficiencies and risks.
Regulators, clearing and risk
Working with regulators to strengthen the markets was a theme throughout the day.
Views expressed included the importance of harmonization of regulation across borders for avoiding/managing future crises and a reminder that regulators in different countries are subject to different pressures. The need for good communication with regulators was also emphasized. “An educated regulator is worth his or her weight in gold,” according to one speaker who added that “educating regulators falls on our shoulders.”
The panel on market structure cited a shift in the perception of clearing in today’s environment. “The value of clearing has been catapulted,” in the view of one panelist, who sees clearing as a pro-customer way to reduce risk, bring value and increase transparency in the markets. Another person discussed the need to cut through the “fog of asset classes” with post-trade analysis that gives firms a comprehensive view of who they are doing business with.
The risk panel underscored the need to have the data and related infrastructure for monitoring risk and anticipating plausible future crises. The importance of “lateral thinking, to make connections and step back and assess issues that could have an impact on the organization” was also cited.
The panel on industry innovation discussed the move to encourage more transactions to go through central counterparties (CCPs), noting how it shifts the risk burden to CCPs and puts more pressure on the margining process. As such, increased competition around margining is likely in the future, according to one panelist, who said, “Efficient collateral management without introducing new risk is where the battle will be fought among clearing houses.” @