by Michael Scholl
Risk management, efforts to shorten the settlement cycle and the need for greater cross-border collaboration among the world’s market infrastructures were key topics of discussion during DTCC’s fifth annual Global Relations Exchange and Training (GREAT) workshop. The five-day event brings together executives from depositories, clearing corporations and exchanges to share ideas, innovations and best practices.
More than 50 delegates from 20 infrastructure organizations and 15 countries attended this year’s conference, which took place at DTCC’s New York headquarters in July.
Premium on dialogue
“We can all agree that this type of dialogue is increasingly important with the globalization of the financial markets and growing need for interoperability among our organizations,” said DTCC Executive Chairman Robert Druskin in welcoming the group. “Dialogue also helps us give our customers better service, reduce their costs and, most importantly, lower risk across the industry.”
From left: Nityanand Phatarphod, National Securities Depository Ltd. (India); Goboundrin Naicker, Strate Ltd. (South Africa); Nalleli Barajas, S.D. Indeval (Mexico); Alejandro Reyes, Deceval S.A (Columbia); Tejas Desai, National Securities Depository Ltd. (India).
Druskin noted that risk has been a major focus of GREAT for the past several years because “the market infrastructure community is being strongly urged by our regulators to confront the challenges of the post-crisis landscape, to strengthen our risk management practices and to create more resiliency in global financial systems.”
‘New era for market infrastructures’
In the conference’s keynote address, DTCC President and CEO Michael Bodson talked about the increasing demands the marketplace is making on market infrastructures globally.
“Each of our organizations is being called upon, from all sides, to mobilize our resources, deliver simple solutions to complex problems and head off the next so-called ‘black swan,’ which is the term used for a rare event such as the 2008 financial crisis, but which is seeming to happen with much greater frequency in the financial markets,” he said. “The takeaway is clear: We’re entering a new era for market infrastructures — what could turn out to be our golden era, a time when the importance and the impact of market infrastructures will be greater than ever.”
On the agenda
The workshop included more than 40 presentations on topics such as regulatory developments, the shortening of the U.S. settlement cycle, business continuity, risk management, data management, over-the-counter (OTC) derivatives, fixed income and global tax issues.
Presenters included GREAT delegates and guest speakers from organizations such as the U.S. Securities and Exchange Commission (SEC), the World Bank, the Federal Reserve Bank of New York, the New York Stock Exchange and the Financial Industry Regulatory Authority (FINRA).
The week opened with a Gallery Walk, a mini-exhibition where delegates networked and shared reports, brochures and other information about their organizations.
Additional events included a visit to the New York Stock Exchange and tours of DTCC’s “command center” and securities processing area.
CPSS-IOSCO and risk management
The impact of the CPSS-IOSCO Principles for Financial Market Infrastructures (FMIs) was one area of focus. Issued in April, these principles are designed to harmonize and strengthen risk management and related standards for the infrastructures supporting the global financial system. (CPSS-IOSCO is a working group made up of the Bank for International Settlement’s Committee on Payment and Settlement Systems and the Technical Committee of the International Organization of Securities Commissions.)
Officials from the SEC, the Federal Reserve Bank of New York and the World Bank participated in the CPSS-IOSCO panel discussion, which received high marks from attendees for helping them better understand the implications of the principles.
Some delegates voiced concern about the impact the new principles could have on their organizations, while others expressed the view that the principles are expected to bring many benefits, including enhanced risk management, improved transparency and increased stability across markets, along with a “leveling of the playing field” among financial market infrastructures.
The conference also gave attendees an opportunity to share some of the creative approaches they are taking to mitigate risk in the current volatile environment.
Delegates heard how the market in Hong Kong synchronized its cash settlement finality to the T+2 securities settlement cycle.
Duong Tuan, Vietname Securities Depository, speaks to GREAT delegates.
A similar initiative being explored in the U.S. to study shortening the equities settlement cycle was also covered. DTCC executives spoke about the industry study that is currently under way to analyze the costs, benefits and related risks that could come from shortening the trade cycle from the current T+3 (trade date plus three days) to T+2 or T+1. The study, which is also examining the conditions necessary to settle trades on the trade date itself (T+0), will be completed in mid-September.
Leadership and innovation
The conference included a series of luncheon discussions, including a conversation with Donald F. Donahue, former DTCC President and CEO, and Gagan Rai, the CEO of India’s National Securities Depository Ltd.
The two long-tenured executives shared some of what they have learned about leadership during their careers and talked about how the financial crisis and its resulting regulatory shifts impacted their leadership styles.
The meeting concluded with remarks by Andrew Gray, DTCC Managing Director of Core Business Management, who said the growing interconnectedness of world markets makes continued discourse among the world’s infrastructure organizations more important than ever.
“Given our critical role as infrastructure organizations for the capital markets globally, to serve our clients and our regulators more effectively we must maintain an open dialogue and work more closely with each other,” Gray said.@