Apart from the announcement about the delay to Target2-Securities and (a bit) more clarity about Swift’s legal entity identification (LEI) project plans, this year Sibos yielded little in the way of hard post-trade focused news from the session floor. However, a fair bit of discussion was dedicated to the topic of the development of post-trade infrastructure in the post-crisis environment, some of which highlighted the dire need for global coordination in this space.
The Depository Trust and Clearing Corporation’s (DTCC) Mike Bodson, who was last year elected as chief operating officer, suggested that rather than adding new post-trade infrastructures into the mix, the industry should focus on better connecting the ones already in existence. He noted that up until now, the “plumbers” (aka infrastructure providers like Swift, DTCC and CLS) have used a “tactical approach” that has left a collection of pieces that do not fit together. “We need to look at how to better coordinate the infrastructures that we have in place already, rather than expending too much energy creating new ones,” he suggested. “To do this we need to look at the relevant friction points between the infrastructures and define the overall operating model better globally.”
This is, no doubt, the rationale and justification behind DTCC and Swift’s continuing partnership approach to areas such as the LEI, the FX trade repository and corporate actions standards. One can expect therefore that both parties will be looking to other market infrastructures next, as a means to further join up the post-trade dots. Swift has already stated that it is keen to develop its value proposition for central securities depositories (CSDs) further, as they face a future in which T2S could force a complete re-evaluation of their business models.
Fabian Vandenreydt, Swift’s head of Securities and Treasury Markets, explained to me that the network provider is revamping its approach to CSDs, so that rather than paying per message, these infrastructure providers will pay a subscription fee for a set of specific, locally tailored services. This will include transaction services for local providers, outsourcing to Swift for messaging, standards maintenance services, technical integration and consulting services on the business side of things (rather than standards) and migration and testing services. Of course, Swift is boosting its reference data focused capabilities too, which should also have a significant impact on the infrastructure provider community.
Going back to the big issue debate on infrastructure, Bodson criticised regulators for asking infrastructures to become “quasi-regulators” as a result of their much more prescriptive transparency requirements. “Asking us to look into what our clients’ clients are doing without regulatory power is not plausible,” he said. Data transparency is therefore an area of growing tension between the regulatory community and market infrastructures in the current environment.
However, Bodson also stated that there are some areas where regulators and the industry can work successfully together, pointing to the LEI initiative as one such example. Fellow panellist Werner Steinmuller, managing director and head of Global Transaction Banking and a member of the group exec committee at Deutsche Bank, suggested that such initiatives should go one step further and bring investment banking and transaction banking together to use the same set of standards. Getting players from the different constituencies involved in the financial services business overall to sit round the table together was suggested as a key step to kick off this dialogue.
Regulators didn’t escape lightly from the discussion either: Bodson questioned whether national regulators really trust one another and suggested that this uncertainty could be a real “stumbling block” for change. Getting rid of the “kinks” in data infrastructure is something that cannot happen without the removal of inconsistencies and regulatory turf wars. Not new news then, but good advice.