The leading knowledge platform for the financial technology industry
The leading knowledge platform for the financial technology industry

A-Team Insight Blogs

Trading Places

The poaching of industry execs by the regulators has been a frequent occurrence over the course of this year and, if recent comments made by the Commodity Futures Trading Commission’s (CFTC) Scott O’Malia are anything to go by, a data management exec is soon to be poached to become the chief data officer (CDO) of the CFTC. But the door has also swung both ways, as evidenced by the appointment this week of ex-Fed official Theo Lubke as Goldman Sachs’ new chief regulatory reform officer (a newly created position that indicates the seriousness with which the firm is taking the changing regulatory environment).

Turning to Lubke first, there has been something of a furore about his appointment, given that he has been spearheading the Federal Reserve Bank of New York’s efforts to reform the derivatives markets and his appointment at the Wall Street giant will mean he has the inside track on regulatory developments (hence he could potentially know how to ‘work’ the system). However, although there are fears in some quarters that his appointment may undermine public policy, he has been and will continue to be subject to the required conflict of interest policies at the Fed for departing employees (which includes a six month prohibition period from attending meetings that concern the area in which he was involved at the Fed, namely derivatives).

Regardless of these political considerations, Lubke’s appointment is yet another indication that regulatory reform is considered to be a big deal for Wall Street firms, in the face of the wide ranging requirements of the Dodd-Frank Act. His new role will, no doubt, also bring him into contact with the internal infrastructure team at Goldman Sachs, as he seeks to iron out any data quality issues underlying regulatory reporting procedures. Hopefully, he will work closely with the data management team, which includes vice president of data quality Jim Perry, to this end.

The CFTC, on the other hand, has been keenly focused on the data challenge facing the industry as part of the reform process, particularly around data standards for instrument and entity identification. In order to be able to effectively carry out this task, CFTC commissioner O’Malia yesterday suggested that a CDO should be appointed to take charge.

Speaking during a Dodd-Frank related rulemaking discussion, he said: “While we are working to establish the regulatory OTC structure, we can’t lose sight of fact that we must reorganise the Commission around technology. We have a massive challenge to move all forms and filings to a fully electronic data collection system that removes the human element from all the new reporting requirements. We must invest in automated trade surveillance systems that can see across markets – similar to the way the fastest algo shops trade today. It is my goal to establish an Office of Market Data Collection and Analysis that has the acquisition and use of data related technology as its primary mission. This office should be led by a capable, forward thinking chief data officer who will be responsible for developing and articulating a strategic vision for the mission critical functions associated with data management administration and a budget that doesn’t include laptops, blackberry support and toner cartridges.”

Reflective of the desires of many of those within data management teams at financial institutions, O’Malia’s comments display the regulator’s recognition of the fundamental challenges that lie at the heart of the business. His flippant remark about budgeting also demonstrates awareness of the under resourced nature of data management and its traditional position as Cinderella within both the regulatory community and firms themselves. Technology may be an enabler to deal with the data challenges, but the appointment of a senior enough individual to spearhead the project is vital to its success.

Last year, the Fed poached Citi’s CDO John Bottega for its Markets Division and we can expect the CFTC (if it receives the much needed funding to patch up the federal budget deficit) to make a similar move. It would certainly be interesting to see who is on their potential shortlist of industry hires; one would expect to see many familiar faces…

You can check out O’Malia’s full speech here.

Related content

WEBINAR

Recorded Webinar: Managing LIBOR transition

The clock is ticking on the decommissioning of LIBOR towards the end of this year, leaving financial institutions with little time to identify where LIBOR is embedded in their processes, assess alternative benchmarks and reference rates, and ensure a smooth transition. Some will be ahead of others, but the challenges are significant for all as...

BLOG

Firms Should Focus on Operational Resilience in Trading, Refinitiv Report Suggests

In response to the Covid-19 pandemic, and the subsequent disruption caused by remote working and extreme market volatility, firms need to rethink their approach to operational resilience for their trading businesses, not only to ensure business continuity, but also to manage regulatory change and develop greater agility and efficiency. That’s the recommendation of a recently...

EVENT

RegTech Summit London

Now in its 6th year, the RegTech Summit in London explores how the European financial services industry can leverage technology to drive innovation, cut costs and support regulatory change.

GUIDE

Trading Regulations Handbook 2021

In these unprecedented times, a carefully crafted trading infrastructure is crucial for capital markets participants. Yet, the impact of trading regulations on infrastructure can be difficult to manage. The Trading Regulations Handbook 2021 can help. It provides all the essentials you need to know about regulations impacting trading operations, data and technology. A-Team Group’s Trading...