DTCC Connection

Nov 13, 2014 • DTCC Connection

DTCC Executives Share Insights from Sibos 2014 Conference Sessions

by Joseph King

Demonstrating a strong presence at the Sibos 2014 Conference in Boston this fall, executives from The Depository Trust & Clearing Corporation (DTCC) joined industry peers and participated on high-profile panels focused on key industry trends, including resilience and recovery, collateral management and corporate actions.


In the first of a four-part series, DTCC Connection shares panelists’ takeaways from their sessions. This week, Donna Milrod, DTCC Managing Director and Chief Administrative Officer, shares insights and perspectives from her session, “Market Infrastructure Resiliency.”


In the second part of the series, Mark Jennis, DTCC Managing Director, Strategy and Business Development, and Executive Chairman, DTCC-Euroclear Global Collateral Ltd., will share key points from his session, “Can Standards Take the Pressure Out of Collateral Management?”

Dan Thieke, DTCC Managing Director, General Manager, Settlement and Asset Services, will share topics of discussion from his session, “Standards Directions: What if…? Scenario Planning to Shape the Standards Future Together” in the third part of the series.

The series concludes with Andrew Gray, DTCC Managing Director, Core Business Management, discussing his joint keynote speech on the importance of collaboration among market infrastructures and how it can help drive solutions to resolve current and future industry challenges.

Donna Milrod, DTCC Managing Director and Chief Administrative Officer
Donna Milrod, DTCC Managing Director and Chief Administrative Officer

DTCC Connection: Supervisory authorities across the globe are requiring financial institutions, including financial market infrastructures (FMI), to develop robust resiliency plans to help the financial system safely and effectively withstand significant market events. What steps can FMIs take to enhance their resiliency?

Milrod: FMIs are designed to manage risk in the global financial system. Given the unique challenges we face and the essential nature of the functions we perform in preserving market safety and soundness, collaboration is essential to ensuring that FMIs are prepared to withstand different types of market shocks.

One way that we ensure resiliency is through frequent industry-wide testing, which helps to uncover areas of vulnerability and establish best practices. For example, recent exercises, such as SIFMA’s Quantum Dawn 2 in 2013 and this month’s pandemic exercise, give firms a deeper understanding of the impact of a crisis on their organization and helps identify steps they need to take to fortify their operations. In addition, this type of testing provides a holistic view of how the industry would respond – and the potential impact on market participants – if such an event were to occur.

It is important to note that all critical market infrastructures are, at their heart, risk managers and must be able to operate without interruption. Therefore, even though not all FMI’s are structured the same and have varying incentives based on different operating models, competing priorities and business objectives cannot hamper our collective goal of finding common ground to preserve the stability of the marketplace.

DTCC Connection: What role do you see regulators playing in ensuring resiliency?

Milrod: Regulators are an important stakeholder in this process and must provide direction and guidance to ensure alignment among FMIs. Going back to my earlier point, collaboration must extend to the regulatory community as well so that FMIs have a robust understanding of areas of concern and are in a better position to address them. This type of public-private partnership is essential to addressing risk and resiliency in the most comprehensive manner possible. However, for this to be successful, the relationship cannot turn punitive against FMIs when areas of vulnerability are identified because it could disincentive future information sharing or participation in resiliency exercises.

Soltra, our new joint venture with FS-ISAC, is a good example of the public and private sectors working collaboratively to combat a common threat – cyber attack. By working together, critical infrastructures can leverage the full range of resources that are available and enhance the industry’s ability to protect itself from cyber crimes.

DTCC Connection: Regulators have been very active in setting guidance on market resiliency and risk management. Do you think they should do more, such as codifying resiliency standards into law?

Milrod: No. Establishing prudential standards and ensuring regulatory guidance is a much more effective approach than codifying standards. First, once requirements are written into law, you can almost guarantee that the world will change. Second, it eliminates the flexibility and creates restrictions on FMIs to manage market crises. While FMIs need to operate within a defined and structured framework, we also must have the ability to make quick decisions during a market event to protect safety and soundness. And third, codifying standards has the potential to create significant unintended consequences and could actually lead to an increase of risk in the system.

DTCC Connection: Should FMIs focus their efforts on addressing the known risks of the past or future risks?

Milrod: There needs to be a balance because FMIs have to be conscious of all types of risks in the system, but our primary focus needs to be on solving for the problems of the future. This is a challenge because addressing future risks may require a different architecture than our current resiliency architecture. While our mission is to mitigate risk in its many different forms, we also need to recognize that a certain level of risk is an essential characteristic in financial markets. So while there will always be a certain amount of risk present in the system, FMIs need to work collaboratively with the regulatory community and others to increase resiliency and bring greater security to global financial markets. As I said earlier, failure is not an option.

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