Perspectives & Key Themes from Market Participants

Recently, SIFMA hosted our Operations Conference & Exhibition. Here we gained insights into top-of-mind topics for market participants from across the financial services industry, including:

• Setting the Scene: Based on our conference survey results, the biggest operational risk in the market today is competing regulatory change requirements. What worked well at the industry level to achieve the T+1 transition = tight industry coordination + a public playbook/related documentation.
• Operations Outlook: T+1 lessons – Prepare the industry did, making the importance of industry collaboration the top lesson learned. Transformation – A theme of the conference, but there is a balance between transformation and compliance spend; the budget is skewed to compliance at 75%, versus 25% for innovation spend.
• Economic Landscape: Strong economy, inflation under control, labor market questions. As such, our speaker discussed the potential for 100 bps in total cuts by year end. Since the conference, the FOMC cut rates by 50 bps, bringing the current target range to 4.75%-5.00% from 5.25%-5.50%.
• Treasury Market Structure: How we got here – improving market resiliency. Not a big bang – phase in of activity over the next eighteen months. Amount voluntarily cleared has already more than doubled since the SEC proposal, but much work will need to be done in a very tight timeframe in order to prepare for the much larger volumes expected once the mandates go in to effect. 46% of survey respondents view Treasury clearing as a high level of concern. The logistics – scope, clearing models, margin, and more. How to prepare – identify transactions, chose clearing model, set up margining regime – start yesterday!
• Equity Market Structure: When it comes to Rule 605, while applauding the need to change and increasing transparency, market participants had hoped the SEC would begin with this rule to use as baseline to address changes to the other proposals. Since the conference the SEC finalized the Reg NMS rule as well.
• Regulatory Update: Multiple regulators weighed in on T+1, Treasury clearing, cyber, operational resiliency, and digital assets.

 

Author

Katie Kolchin, CFA
Managing Director, Head of Research

Related Resources

• Event

  Operations Conference & Exhibition

• Resource

  T+1 After Action Report

• Podcast

  An Update on the Path to Clearing US Treasuries