Events have increasingly become a ‘conduit’ to understand the key themes that transcend an industry, whilst acting as an important ‘carrier’ for delivering targeted messages to specific audiences; our Annual Post Trade Conference being no exception.
With a full agenda covering everything from CSDR to digital assets, here are some of my key takeaways from our 14th Annual Post Trade Conference held in London a few weeks back; another hugely successful and timely event!
Context is Key
Much has been made of 2024 being the ‘year the world goes to vote’, and with this year’s Post Trade taking place on the ‘morning after’ the US Presidential Elections, that point felt more poignant than ever. While it was too early to comment on the impacts of a Trump victory, we were able to explore the regulatory and geopolitical context to which our sector has never been more in tune with.
In a world where the only certainty, is uncertainty, and where long-standing alliances are being tested, the need for national, broad-based investment in security, energy, technology and supply chains has never been greater. With this often comes the ambition to boost the strength and depth of local capital markets, which provides opportunity for our sector.
Andrea Gentilini, Head of CSSF Market Infrastructure Division, and Chair of the ESMA Post Trading Working Group, as the conference keynote, provided the voice of the regulator. Underlining the importance of post trade as being the ‘backbone’ of the industry, Andrea stressed the importance of getting the fundamentals right before looking to the future – a theme that ran throughout the conference. In lieu of accurate data, full transparency and robust risk management, the regulation drum is likely to only beat louder.
With this came the context for the day, balancing the opportunity of growth with the challenge of delivering on fundamental operational and regulatory requirements.
Automate to Efficiency
Unsurprisingly, Accelerated Settlement was a recurring theme throughout the conference. With the expectation that both the UK and the EU will transition in 2027, all eyes were on early adopting jurisdictions to understand the challenges and best practices for a seamless migration. With some panellists stating that while on the surface, the migration to T+1 proved successful, much of this was down to deploying additional headcount, or ‘doing more of the same’. This is clearly a short-term and unsustainable fix, leading to further budget constraints and a lack of longer-term investment into the areas such as automation. The industry needs to address the challenge head on and drive long term efficiency.
Now in its 14th year, the Post Trade Conference has seen technologies and solutions evolve, with a constant flow coming to market every few years. This year saw a marked change in sentiment, with panellists highlighting the need for technologies to work in harmony, and not around siloed product domains.
At a time where the near-term firefighting draws the most attention, the challenge is on product owners to develop the narrative to demonstrate the value of an investment, even if the ROI may be over a 3–5-year lifespan.
Data is King
From SFTR to SEC Rule 10c-1a, the need for accurate and timely aggregated data has never been greater. Couple this with an ever more sophisticated market, the breadth and depth of the potential data pool has also grown immensely.
When looking at data needed for the ever-increasing regulatory reporting demands, it was clear from the discussions that the industry needs to do more to support the provision of high-quality data, which in turn will drive better outcomes from the regulatory community – in other words, we can control the narrative. At a time where our nuanced product is captured by broad-based regulation, accurate data can provide regulators with a complete understanding of the intricacies of our often-complex flows, whereas gaps allow for misconceptions to be formed which will only lead to further overregulation.
However, with data also key to effective risk management, strategy development, collateral optimisation and for driving adoption of new technology, the risks associated in inaccurate or incomplete data go far beyond regulatory penalties.
A Standardised approach to Standards?
While Business Continuity Management, Disaster Recovery and Crisis Management are not new concepts for financial services, greater regulatory focus and recent technology outages have pushed operational resilience up the agenda. With nearly 60% of the audience believing that the biggest threat to the industry is cyber security, the need for stable and ultimately, interoperable technology stacks has become paramount.
Against this backdrop, and with this year’s conference framed around the fragmentation of the vendor landscape, is now the time for standardisation to move from the fringes to large scale adoption. If that is the case, then which standard? The Common Domain Model was discussed in detail as providing a tested model across the securities lending, repo and derivatives space. While the ‘early adopter risk’ carries significant weight in business, recent events have shown that often the risk of not doing anything can prove the costliest.
New Tech, Same Challenges
2024 has seen the digital asset, tokenisation and AI agendas pick up pace with a number of new test cases, vendors and regulations coming online and a marked increase in mainstream attention. The understanding of the treatment and application of these new technologies has grown immeasurably however, to really realise the bottom-line benefits, we will need to see scale through collaboration in the market.
To close, our industry finds itself at a crossroads, wanting to embrace the new while still needing to address the challenges of the old. While the technologies exist, finite resources, tighter margins and stretched liquidity pools mean there is both, no perfect answer, and that inaction or reliance on legacy approaches may soon not be sufficient. What is clear however is that accurate data will be at the heart of every action.
Sejal Amin
