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The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

And So it Begins…

Sibos 2010 kicked off this morning to a rather drizzly but promising start; with around 8,000 odd delegates registered for the annual Swift user conference in Amsterdam, it’s set to be a busy week. The securities market infrastructure session began proceedings by debating the benefits of competition versus consolidation in the evolving global market: a topic that is highly relevant for the reference data sector also.

The general consensus of the panellists, which included BNP Paribas’ head of sales and relationship management Alan Cameron and ABN Amro’s CCO Jan Bart de Boer, was that interoperability and competition are preferable to a monopoly in the world of post-trade infrastructures. Interesting news given that this afternoon’s panel on a “golden” securities reference data utility is about setting up such a mandated monopoly.

Rather than imposing a regulatory mandated monopoly, Thomas Zeeb, CEO of SIX Securities Services, argued that interoperability between infrastructures in individual European countries is the more pragmatic and practical option. “However, this level of interoperability needs to be fully supported and this is where regulation is needed: to impose sanctions on those that block interoperability.”

Philip Brown, member of the executive board for Clearstream Banking, added that the cost of establishing a monopoly would potentially make it an unattractive proposition. “If we are aiming to achieve greater efficiency and lower cost across Europe, a single monopoly provider is unlikely to be able to offer this. Moreover, mandating consolidation will not work due to the fact the public sector is not able to agree on something as esoteric as post-trade infrastructure,” he explained.

Cameron agreed and noted that there are significant obstacles in the path of achieving the removal of the Giovannini barriers across Europe, including differences in the treatment of tax and corporate actions from country to country. He pointed to the success of initiatives such as Link-up Markets between central securities depositories (CSDs) as an example of interoperability in action.

He also reiterated the potential cost of a monopoly as a drawback: “It will be difficult to build into a system all the requirements of individual European markets, three or four may be possible, but 20? Who wants to pay for that?”

De Boer reckoned that many local small and mid cap firms would also be uninterested in using a global platform due to cost considerations (an equation that has traditionally put many of these firms off from using Swift, pre-Swift Lite that is). “Local constituents want local silos in order to meet their specific requirements,” he added.

These are arguments that could also be used in the discussions around the establishment of a central reference data utility for Europe. Cost is certainly an issue and the desire for the continuation of domestic standards for data is another that rings true in the reference data context. Perhaps the idea of several commercial providers in the utility context, where data standards mapping is provided, could be a comparable offering to the post-trade infrastructure equation? I await this afternoon’s panel to find out…

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