Wednesday 26 March 2014

Insights from TSAM 2014

Yesterday I had the pleasure to attend TSAM2014 as a panel member. Of course I took the opportunity to look in on other sessions and network with friends, old and new.

Considering the "TS" in TSAM stands for trading systems, it seemed that the majority of technology represented there addressed client reporting and information management. This may be a comment on the state of trading systems or a reflection of the buyside's current interest.

My predominant interest was in the OTC Derivative stream, the regulation and developments affecting it. I did come away with three insights/comments that I thought worth sharing.

A number of sessions operated under Chatham House Rules so I won't attribute any comments other than my own.

#1 The "Regulators" who put out a good showing seemed to bleat on about how the buyside does not come to them and contribute. This was a repeated comment and was supplemented by a request that any representations come with the associated quant active analysis.

This seemed to highlight a delusion that the buyside is homogenous. The audience pointed out that the buyside is in fact many different interest groups and that the final asset owner caught by the regulations may not be a FS company and may well be in a third country.

There were requests for the buyside to speak with one voice, but this feels as likely as continental Africa having a single economic plan.

There also seems to be no thought for the resourcing required; resources that are seriously constrained.

Now I am not saying this is easy, but as the regulations are complex and multi-territorial so the regulators need to up their game and understanding. It seems they still think about their remit being neatly defined geographically and organisationally. Anyone charged with implementing the torrent of rules knows that is certainly not the case.

#2 I challenged the regulators that if they wanted better behaviours from the buyside then they needed to make better delivery to the community, proving clarity in good time, not making late changes and helping prioritise the torrent of regulatory change being heaped in firms. They are part of our critical path.

The response was a robust report of under-resourcing. Apparently the European Commission only has four (4) people working on this. It was claimed that each was working 80 hour weeks, but then look at what the industry has to do too!

The creation of ESMA was to try and address the shortfall, but it too is under resourced.

When I pointed out that if I excused late or poor quality delivery on only having four people assigned to this critical regulatory activity, the regulators would hang me and the firm I was working for, out to dry. I must point out that my teams have met every regulatory date and requirement so far, but only by extreme prioritisation that had seen the whole development and testing team dedicated to the regulatory cause for extensive periods.

#3 The room was advised of a shadowy group who are now "coming out of the closet" - not my words but a quote from the event - called the ODRG, or OTC Derivatives Regulatory Group. This seems to have been an informal, undocumented group of regulators who have met frequently to discuss the cross border issues created by various regulations. This is critical given the duplications, inconsistencies and conflicts the market is faces implementing the rules.

It appears that this group has just issued its first report to the FSB. The conference was advised to read between the lines as the report could appear a little anodyne if read literally. I will certainly look out for the is report on the FSB site in due course.

The work this group is undertaking is hugely important to any firm with an international or gloabl business. I just wonder why it had to be clandestine until now?





2 comments:

  1. @Bill, thank you for that. I had a look and the way it was described at TSAM sounded different. It will be interesting to see what they have published.

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