Markets Media spoke with Kellee Campbell, Divisional Director Energy & Commodities, Australia & New Zealand, ICAP, who won Excellence in Commodities at the 2024 Women in Finance Asia Awards.
What was your reaction to winning the award?
Initially I was taken by surprise as didn’t think I was in the running and was thrilled just to be on the finalists list. But after sharing with my colleagues and clients all who were excited and very supportive of the award I started to reflect on my achievement. The award had me revisiting my career path and the many obstacles and challenges I have overcome to get to where I am today.
What have been the main drivers of your success?
D Determination. To always strive to be the best I can be in my role, whether as a trader, broker, manager, leader, and colleague.
R Resilience. Particularly as a female in a male dominated industry, learning to go beyond any pushbacks and stand up for myself in my roles.
I Initiative. Taking opportunities when they have arisen to prove myself, the markets I work in and growth of new products and people.
V Values. Always being true to my values, not swayed by short term wins. Authentic in all roles during my career.
E Energy. Everyday, happy to be here bringing my full self to the day in markets, my role and to people around me both internal and external.
R Respect. Of my team members, support functions, clients, and any external parties we work with. Most of all earning and keeping the respect of others.
S Success itself. It comes in many forms, and I have driven myself to be successful in all aspects of my career, many of which aren’t spoken of, but I hold close.
Tell us about a passion you have outside the business.
Travel. Growing up in a small village in New Zealand I always knew I wanted to travel the world. I got a small taste when I was seven years old and since then have been fortunate to visit many countries.
I love to experience new cultures, meet strangers, taste different food, explore different landscapes, visit remote locations, and learn heritages. I love sharing my passion with my husband and children, now teenagers and we are all extremely grateful for our many adventures. To date our highlights as a family have been a caravan trip around the top end of Australia and backpacking by train through China.
What’s your favourite aspect of working at ICAP ?
Been able to have a vision of what I believe ICAP Energy and Commodities can be and having the support to make it happen. It’s about people and relationships. Building strong connections with people and working together to grow our business.
What are your future goals?
There are two. To continue to grow ICAP’s offering to our current and future clients across the energy and commodity markets. Whether via new products, platforms, data and information, or more brokers to meet the market’s needs.
Secondly to encourage more females into broking roles and with that diversify our team, our relationships, and our vision for the future.
What’s your advice to the next generation of women in finance?
Use your voice. Speak up and be sure your opinions are heard and listened to. Continue to boost your self-esteem. Empowered women empower others, so I encourage you to make the women around you feel strong, supported, special and secure.
Markets Media spoke with Anne Zhang, Director, Head of China Flow Credit Sales at Deutsche Bank, who won Rising Star at the 2024 Women in Finance Asia Awards.
What is your reaction to winning the Award at the 2024 WIFAA Awards? I’m privileged to receive this award. Thank you for the great honor!
Briefly describe your background and career to date.
I was fortunate to be able to spend time in many different parts of the world during my school and career life, experiencing the diverse culture and ways of living across the globe.
I was born in Shanghai and have spent part of my middle school in Tokyo before going to high school and college in the States. I started my career in Tokyo in 2008 as a graduate in RBS. In 2009, I relocated to Hong Kong, and joined ANZ in 2013 when I became the first credit-focused China sales in the market, at a time when most China sales were generalists. Through the 5 years at ANZ HK, we take pride in building a first-class flow credit platform, making the bank one of the top shops in China IG flows. After ANZ, I spent two years at Mizuho Security before finding home here at DB.
Who have been the main influences in your career?
I could not have achieved this without my trading partners at work – Zhirong Chen, Alissa Ren and Owen Gallimore – we have worked together since ANZ. Together we built the successful Asia credit trading platform there, and now we aspire to bring it to an even higher level here in DB. I enjoy the people I work with every day. Work is hard, but with a common goal we take passion in what we do, and hard work translate to a great feeling of camaraderie and a collective sense of achievement. I take pride in what I do, and enjoy the DREAM TEAM which I am part of. 😊
What do you like most about the world of finance/trading?
The forever changing dynamic. Everyday is a new day with different challenges and opportunities!
What’s your favorite aspect of working at Deutsche Bank?
As a single mother of a 6-year old, I am grateful for the flexible working environment that DB provides. The senior management here promotes a “Women in Business” culture, and there is a high level of trust between me and my direct manager Bryan Tan and Asia Pacific Co-Head of GFCT Beaux Pontak. Every day here, I feel well supported by a network of trusted colleagues in my team and across the firm.
Where do you see yourself in five years?
Shanghai, that’s my hometown. I cherish my childhood memories of growing up in that dynamic city. I haven’t lived there as a grown-up yet, and I believe it will be wonderful to spend time there one day.
Markets Media spoke with Charlotte Yu, Team Head, Director, Corporate Development, Greater China and North Asia at Bank of Singapore, who won Excellence in Banking at the 2024 Women in Finance Asia Awards.
What was your reaction to winning the award?
Charlotte Yu
Honoured and humbled. The award is far more than a personal achievement or milestone, it is a reflection of the profound impact of many of us who stand united to break the glass ceilings. It is a testimony that we are committed to pave the way for a more inclusive future where every voice is heard, and every contribution is valued.
What have been the main drivers of your success?
Boldness and courage have been my guiding stars on the path of success. Sometimes we just need to do it. It is about taking the first step, even if it’s into the unknown.
Reflecting on my journey, I recalled a childhood experience that shaped me profoundly though I tend to keep it private in the past. Back in primary school, I came across with an advertisement for a children’s TV channel audition. It piqued my interest, so I took a shot, and I wrote to the TV channel using my very limited vocabularies for a chance. Fast forward, I spent a year’s worth of weekends and holidays filming with laughter, sweat, and tears. And there was this one time, I almost got myself landed in a hospital for filming under a scorching sun, but it was all part of the learning journey, and it all began with that courageous letter.
Another leap came when I decided to pursue my university studies in Germany despite not speaking the language. Was I scared? Maybe, but pushing beyond my comfort zone was essential. By the end of my studies, I realised it was perfectly fine to tackle a chuck of my education in German.
As my career evolved across the finance industry, I encountered countless firsts – different products, diverse client segments. These experiences have shaped my journey and continue to drive my success.
How would you describe your work/management style?
My work style is rooted in transparency. I believe in fostering an environment where open communication is encouraged, and differing opinions are respected. It is about having the courage to “agree to disagree” and valuing everyone’s perspective. I am convinced that it is our collaborative efforts that propel us towards success, as true achievement is never the result of a solitary endeavour. It is the collective work and shared vision that make the triumphs worthwhile.
What motivates you?
Opportunities are what get me out of bed in the morning. It is about embracing the unknown with a leap of faith and sticking to our guns with unwavering persistence. Just like in golf (one of my favourite sports), where every swing counts and every putt could be the game-changer, it is the relentless pursuit of improvement and the determination to keep going, hole after hole, that truly motivates me. It is not just about playing the game; it is about persisting until the very last shot.
What is your greatest accomplishment?
I would not call it my greatest accomplishment yet, rather this is something I have learnt along the way through my mentors and experience. To me, what truly matters is that we lift each other up and achieving more together. Whether it is within a team, a taskforce or through our internal and external partnerships, the accomplishment and fulfilment come from an environment or platform where people can shine, excel, and contribute toward shared goals and improvements.
What is the one piece of advice you’d give to someone starting out in finance/banking industry?
Here is my two cents. Speed matters, it is not just about scaling up; it is about staying ahead of the curve and outpacing the competition. People who are agile, able to adapt to the evolving world, embracing generative AI and hone the judgment have advantages. And also remember. Creativity is the compass guiding us through this bright future.
Michelle Scrimgeour, CEO of Legal & General Investment Management and vice-chair of the Investment Association, is stepping down from her role after five years in the seat, it was announced today – as the group lays out a new strategy for “sustainable focus, sharper growth, enhanced returns” that includes combining LGIM into a new group asset management division.
In a Q2 update published today, Legal & General laid out a “refreshed” set of strategic and financial targets that include growing its retail and institutional retirement business by around GBP50bn, respectively, over the next four years. Notably, the firm is also restructuring its asset management capabilities, bringing LGIM and Legal & General Capital (LGC, the group’s alternative asset platform) together as a unified global public and private markets asset manager.
Michelle Scrimgeour
Michelle Scrimgeour, who took on the LGIM CEO role in 2019 after several years as EMEA CEO of Columbia Threadneedle, will be leaving the firm.
“I have decided that this is the right time to step down as CEO,” said Scrimgeour in a post. “It has been an immense privilege leading LGIM, and I am proud of our many achievements… For me, this is a natural moment to reflect – and I’ve decided that now is the right time to embark on a new chapter and allow new leadership to take the company forward.”
Scrimgeour will continue as CEO of LGIM while the group looks for a successor, and will lead the transition and establishment of the new asset management division with Laura Mason, former CEO of LGC, who has been appointed group CEO of Private Markets. Both will report to Legal & General group CEO.
António Simões, group CEO, Legal & General
The group is targeting a 6-9% annual EPS over the next three years with a targeted operating return on equity of 20%, and plans to return “more money” to shareholders, starting with a GBP200m share buyback in 2024.
“Over the last five months we have rigorously reviewed our business, listening to investors, customers, partners and employees. This work has deepened my belief in our strong foundations and excellent potential,” said Simões. “Our vision is for a growing, simpler, better-connected L&G, focused on three core business divisions, and set apart by our shared sense of purpose and powerful synergies.”
Non-strategic assets will be managed by a new corporate investments unit, reporting to group CFO Jeff Davies, with the goal of “maximising shareholder value” ahead of potential divestment.
This will most notably include CALA Homes, a UK housebuilder acquired by LGC in 2018.
In this instalment of our regulatory round-up, the CFTC in the US makes recommendations on Basel II and variation margin processes, while Europe is busy with collective action as the EU’s supervisory authorities work to enhance market practice on sustainability-related claims and strengthen information exchange. Meanwhile, the International Organisation of Securities Commissions publishes its final report on market outages.
CFTC makes recommendations on Basel III endgame and variation margin processes
MiFIR review: ESMA consults on three new technical standards
ESMA publishes data on markets and securities in the EEA
ESMA provides guidance to firms using artificial intelligence in investment services
ESAs publish joint annual report for 2023
ESAs and ENISA work to strengthen cooperation and information exchange
ESAs call for improved market practice on sustainability-related claims
ADGM and the Bermuda Monetary Authority sign digital assets memorandum of understanding
DMIST publishes final standard for average pricing
IOSCO publishes final report on market outages
Americas
CFTC makes recommendations on Basel III endgame and variation margin processes
The US Commodity Futures Trading Commission’s Global Markets Advisory Committee (GMAC), sponsored by CFTC commissioner Caroline Pham, has made recommendations to examine the impacts of proposed US bank capital requirements and to improve collateral and liquidity management for non-centrally cleared derivatives.
Caroline Pham, commissioner, CFTC
“The GMAC continues to make great progress developing thoughtful recommendations and insightful work to aid the CFTC, other policymakers, and participants in global markets,” commissioner Pham said. “In less than a year, the GMAC has now adopted 13 recommendations on a broad array of issues to promote and bolster market integrity and resiliency. These recommendations continue to have a tangible impact, not only on rulemakings here at the CFTC, but also among our counterparts and international standard setters. As the GMAC’s sponsor, I’m honored to help provide a public venue for some of the preeminent industry experts to discuss and develop potential solutions to addressing the biggest challenges in global markets.”
The report includes various recommendations to further examine the impact of US bank capital proposals on end users, central clearing, and derivatives markets.
The GMAC recommends that the CFTC support and facilitate industry implementation of the BCBS-IOSCO recommendations for streamlining of variation margin practices.
EMEA
MiFIR review: ESMA consults on three new technical standards
The European Securities and Markets Authority (ESMA), launched a public consultation on non-equity trade transparency, reasonable commercial basis (RCB) and reference data under the Markets in Financial Instruments Regulation (MiFIR) review.
In the consultation ESMA is seeking input on three topics: Pre- and post-trade transparency requirements for non-equity instruments, which aims at ensuring trade information is available to stakeholders by improving, simplifying, and harmonising transparency requirements; obligation to make pre-and post-trade data available on an RCB intended to guarantee that market data is available to data users in an accessible, fair, and non-discriminatory manner; and an obligation to provide instrument reference data that is fit for both transaction reporting and transparency purposes.
ESMA publishes data on markets and securities in the EEA
ESMA has published its Statistics on Securities and Markets (ESSM) Report, with the objective of increasing access to data of public interest.
The report provides details about how securities markets in the European Economic Area (EEA30) were organised in 2022, including structural indicators on securities, markets, market participants and infrastructures.
It covers the distribution of legal entities by member states, either based on their supervisory role or their location. It also contains information on third country entities when their activities are recognised or when their securities are traded in EEA30.
ESMA provides guidance to firms using artificial intelligence in investment services
ESMA has issued a statement providing initial guidance to firms using Artificial Intelligence technologies (AI) when they provide investment services to retail clients.
When using AI, ESMA expects firms to comply with relevant MiFID II requirements, particularly when it comes to organisational aspects, conduct of business, and their regulatory obligation to act in the best interest of the client.
Potential uses of AI by investment firms which would be covered by requirements under MiFID II include customer support, fraud detection, risk management, compliance, and support to firms in the provision of investment advice and portfolio management.
ESAs publish joint annual report for 2023
The Joint Committee of the European Supervisory Authorities published its 2023 Annual Report, providing an account of the joint work completed over the past year.
Through the Joint Committee the ESAs explore and monitor potential emerging risks for financial markets participants and the financial system as a whole.
The main areas of cross-sectoral focus were joint risk assessment, sustainable finance, digitalisation, consumer protection, securitisation, financial conglomerates, and central clearing. Among the Joint Committee’s main deliverables were policy products for the implementation of the Digital Operational Resilience Act (DORA) as well as ongoing work related to the Sustainable Finance Disclosure Regulation (SFDR).
ESAs and ENISA work to strengthen cooperation and information exchange
European Supervisory Authorities have signed a multilateral Memorandum of Understanding (MoU) to strengthen cooperation and information exchange with the European Union Agency for Cybersecurity (ENISA).
This MoU sets out the framework for cooperation and exchange of information on tasks of mutual interest, including policy implementation, incident reporting, and oversight of critical Information Communication Technologies (ICT) third-party providers. It will also promote regulatory convergence, facilitate cross-sectoral learning and capacity building on areas of mutual interest, and information exchange on emerging technologies.
Verena Ross, chair, ESMA
Verena Ross, chair of the joint committee of the ESAs and ESMA chair, said: “This new cooperation agreement that we sign today will reinforce the collaboration between the ESAs and ENISA. By bringing together the ESAs working on cybersecurity risk in the financial sector and ENISA as the EU’s cybersecurity agency, we are further strengthening our commitment to safeguarding the financial system from information security risks.
“In an interconnected world, ICT risk does not limit itself to one geographical or sectoral area, making cooperation in this field crucial. Through facilitating collaboration and resource sharing, we continue to enhance our capability to detect and respond to cybersecurity threats.”
ESAs call for improved market practice on sustainability-related claims
The European Supervisory Authorities have published their final reports on greenwashing in the financial sector.
In their respective reports the ESAs reiterate the common high-level understanding of greenwashing as a practice whereby sustainability-related statements, declarations, actions, or communications do not clearly and fairly reflect the underlying sustainability profile of an entity, a financial product, or financial services.
NCAs and ESMA are taking steps to better monitor and detect greenwashing and to critically scrutinise sustainability-related claims in various sectors.
ESMA chair, Verena Ross, said: “Effective and consistent supervision of sustainability-related claims is critical to investor protection and a trustworthy environment for ESG markets. With a risk-based approach in mind, ESMA has promoted EU-level common supervisory actions across the sustainable investment value chain and will continue to foster convergent and effective supervision. We will also continue to support NCAs, to enhance supervisory capacities in this area and invest in the tools needed to address data challenges”.
ADGM and the Bermuda Monetary Authority sign digital assets memorandum of understanding
The Financial Services Regulatory Authority (FSRA) of Abu Dhabi Global Market (ADGM) and the Bermuda Monetary Authority (BMA) have signed a joint Digital Assets Memorandum of Understanding (MoU).
The MoU creates a framework enabling the collaboration between the BMA and the FSRA to support the establishment of digital assets entities across their jurisdictions and ensure their effective supervision.
BMA CEO, Craig Swan
BMA CEO, Craig Swan, said: “The agreement with the FSRA marks a significant step in strengthening links between regulators, supporting innovation and enhancing capabilities and resources through international collaboration. This MoU leverages the stability and expertise of our markets to address the evolving needs of the digital asset business sector. We look forward to greater knowledge exchange and deeper regulatory cooperation to encourage a secure and sustainable growth environment.”
World
DMIST publishes final standard for average pricing
FIA and DMIST, the Derivatives Market Institute for Standards, have published the Average Pricing Standard.
This second standard published by DMIST supports the final standard for Improving Timeliness of Trade Give-ups and Allocations, released in June 2023. The lack of standardised average price functionality across CCPs was cited as one of the issues that prevents processing trades on Trade Date.
This Average Pricing Standard calls for Central Counterparties (CCPs) globally to adopt certain minimum standard average pricing functionality. Standardised functionality will help drive consistency and improve the current allocation and timing issues associated with average price order workflows.
Samina Anwar, global derivatives operations director, Cargill: “The introduction of this new, industry-wide standard will benefit all market participants who use average pricing. The standard will help end users make the allocation process more efficient and reduce risk by minimising market-specific exceptions. End users can take advantage of on-CCP average pricing and be confident that their allocations are fair and equitable.”
Don Byron, head of global industry operations and execution, FIA, executive director, DMIST: “DMIST was founded on the principle that working together in the spirit of collaboration and trust could help make the industry more efficient and reduce risk for all market participants. That vision is being realised with the publication of the 30/30/30 Standard and now the Average Pricing Standard, which address two of the industry’s biggest pain points. Building on the success of the first two standards, collaboration on three additional standards is underway as well as implementation and adoption of the two final standards.”
This Average Pricing Standard applies to all CCPs globally. It calls for CCPs currently offering average pricing to review their functionality and adapt to the minimum functionality standards set out in the Functionality Table. For CCPs that currently do not provide on-CCP average pricing, the final standard provides a roadmap to develop a globally recognized average pricing service.
IOSCO publishes final report on market outages
IOSCO has published its final report on market outages, addresses the need for improved preparedness and management of market outages to ensure market resilience and investor
confidence.
The report identifies key findings from recent market outages and sets forth five good
practices to assist regulators, trading venues and market participants in preparing for, and managing, future market outages and thereby helping
improve market-wide resilience.
The good practices cover five key areas: Outage Plans; Communication Plans; Reopening of Trading; Closing Auctions / Closing Prices; Post-Outage Plans.
Isadora Tarola, chair of the IOSCO Committee on Regulation of Secondary Markets said: “Market Outages can be highly disruptive. Therefore, it is important for trading venues to consider adopting the proposed good practices. This can contribute to market resilience and help ensure orderly trading during outages. IOSCO remains committed to supporting initiatives that promote financial stability and investor protection.”
Markets Media spoke with Melanie Tan, Head of HR – APAC at Marex, who won Excellence in Talent Management at the 2024 Women in Finance Asia Awards.
What was your reaction to winning the award?
I am extremely honoured and grateful to receive this award on behalf of our global team. This award is deserved recognition of the tireless effort that our dedicated group of professionals puts in day in, day out, and I am privileged to be part of this team.
What have been the main drivers of your success?
It might be cliched but I believe that hard work and communication are two of the key drivers of success in any profession. It’s about taking the time to talk to people, understanding the issues, having strong follow-up, and then being persistent and consistent. By definition, Human Resources is about people and so I believe in treating others with respect in all situations.
What are your tips for an effective talent management strategy?
In order for any talent management strategy to succeed, it must fit the organisation’s particular needs and culture – therefore going with the trend of the day may not ultimately be beneficial.
What’s more important is taking the time to speak to stakeholders and understanding what type of talents they are looking for, and when and where they are needed. When you understand that, you can have a meaningful discussion on sourcing, particularly given our uniquely entrepreneurial and agile culture.
Once the talents are in the door, it is then vital to engage them so that they want to stay and thrive. The key to achieving this is often a combination of effort between HR and the business to ensure that there are meaningful work assignments for everybody.
One of the key differentiators of Marex is the breadth of our market access and solutions, and that provides our people with a rich variety of opportunities. We always look to ‘grow our own’ and make Marex a place that ambitious, hardworking and talented people choose to build their careers.
Lastly, it’s also critical to organise community activities that create a sense of identity and bonding, as well as ensuring that we are helping our people to manage their own wellbeing.
What’s something you’re really proud of and why?
I am really proud to be part of the Marex growth story, particularly in the APAC region which has tripled in size since I joined two years ago. I like to think that I played a role in that success through partnering with the business to grow the talent pool and manage the people aspects of the various acquisitions that we made over the last two years.
What’s your favorite aspect of working at Marex Spectron?
I enjoy how dynamic the organisation is. No two days are the same. The leadership is always looking forward to new areas of growth, and driving the company onward. I am surrounded by some of the smartest people I have come across in my professional career and that is both fulfilling and exciting at the same time.
The International Organisation of Securities Commissions (IOSCO) has outlined a number of good practices for mitigating the effects of market outages.
The recommendations, published in a report produced by the IOSCO board, are drawn from findings from recent market outages on listing trading venues in IOSCO jurisdictions and builds on IOSCO’s past work on operational resilience and business continuity.
Jean-Paul Servais, chair of the board at IOSCO
On the recommendations, IOSCO said: “These good practices provide sufficient flexibility so that they can be considered for adoption across different types of trading venues, asset classes and market structures.
“While they were primarily developed for equities listing trading venues, IOSCO is of the view that some of these good practices may have relevance more broadly, for example, in the context of non-listing trading venues and derivatives markets.”
In the event of outages, the final report proposes that trading venues adopt a number of good practices. Primarily, venues should develop and publish an outage plan, which could include the venue’s communication plan and reopening strategy.
Venues should also implement a communication plan, which should allow for the publication of an initial notice of the outage to market participants and the general public. Venues should also keep communication channels open, providing clarity on the status of orders and ensuring an adequate period of notice before the resumption of trading.
The processes and procedures that trading venues would follow to operate a closing auction and/or to establish alternative closing prices should be published in the outage plan and communicated to all market participants during an outage. Trading venues should also consider including in the outage plan a cut-off time by which trading venues would inform market participants whether a closing auction will be run.
Venues should also conduct and share with the relevant regulators a lessons-learnt exercise of the market outage and adopt a post-outage plan, with clearly defined timelines and allocation of responsibilities for remediation, designed to reduce the likelihood of future incidents and to improve the ability of the trading venue to effectively respond to outages.
Bob Cioffi, global head of equities product management, ION Markets
ION has been registered as an independent software vendor with BSE, with its Fidessa trading platform certified for cash equities trading on the exchange. Bob Cioffi tells Global Trading why it’s the perfect fit for the Indian markets.
Fidessa offers order management, algorithmic trading and risk management services, with the goal of providing simplicity, reliability and automation to users.
On why the solution is well-suited to the Indian markets, Bob Cioffi, global head of equities product management at ION Markets, told Global Trading: “Fidessa’s capabilities are well aligned with the needs of the India market where much of the growth is from retail investors and therefore requires stability and scalability as well as access to the full suite of OMS functionality including advanced algorithms.”
Many Indian brokers are already using the platform for trading or connectivity outside of India, ION reported, stating that its approval by BSE will help to expand and develop the country’s capital markets. Cioffi shared that the firm is noting interest from existing clients with a presence in India as well as national brokers looking for a strategic vendor to grow their business with.
The next stage of the firm’s expansion into India will be gaining NSE empanelment, Cioffi told Global Trading. He added: “ION is working to expand its presence in India, and we see a significant opportunity to leverage our products and experience in the growing India market – which became the fourth largest equity market in the world earlier this year.”
Cioffi concluded: “Already established as a trusted market data vendor to brokers and exchanges in India, the partnership with BSE further strengthens ION’s position in the region, and unlocks Fidessa’s full capabilities for exchange members.”
DTCC is working with Cboe Clear Europe to deliver an enhanced post-trade workflow for over-the-counter (OTC) cash equities trades, designed to help increase settlement efficiencies across UK and European markets.
The service will bring OTC cash equities trades into Cboe Clear Europe’s cleared environment, which can then be netted against on-exchange transactions for settlement purposes, delivering potentially significant efficiencies. The first effort in this initiative to link DTCC’s CTM to Cboe Clear Europe’s CCP is projected to go live in Q2 2025.
Val Wotton, DTCC
Val Wotton, managing director and general manager, DTCC Institutional Trade Processing, said: “Cboe Clear Europe’s extensive venue coverage combined with CTM’s large client base will deliver increased operational efficiency and netting opportunities across European trading venues.”
DTCC and Cboe Clear Europe will develop a proof of concept that links DTCC CTM’s tri-party trade matching workflow with Cboe Clear Europe. This connection will allow prime brokers to receive a golden copy of transaction details when a match is achieved between a hedge fund and executing broker via DTCC’s CTM service. Once the prime broker enters into this tri-party match, CTM automatically sends those matched trades to the CCP, providing netting and clearing benefits to mutual clients.
The new workflow will help reduce operational and settlement risk, as well as post-trade friction as additional markets consider and prepare for accelerated settlement.
The proposed benefits of the initiative include reductions in post-trade processing time, risks associated with OTC transactions and settlement costs between executing brokers and prime brokers. It is anticipated that the joint solution will also help facilitate a reduction of capital requirements when moving from OTC to CCP settlement as well as lower trade fails and defaults.
It’s now been two weeks since T+1 went live in North America, following years of discussion, debate and deliberation. As the industry starts to settle into a new rhythm, what’s the landscape really looking like? And what will the rest of the year hold?
“The industry can’t sit back and think: ‘job done!’” Such is the warning of Tiago Veiga, CEO at Aurum Solutions. While many institutions have been keen to automate a lot of their manual processes, this enthusiasm will have to be kept up, he says. “Back-office staff will be under serious pressure to prevent things like bugs or glitches from disrupting the tighter settlement deadline.”
If firms haven’t yet started replacing their legacy systems to accelerate their post-trade activities, it will be particularly difficult to operate under T+1; “these types of activities are time-consuming and subject to human error”, Veiga affirms. These kinds of updates will also enable greater monitorability, adds ITRS CEO Guy Warren, with tech teams able to see the back office “through a single pane of glass”, allowing them to “detect and respond to issues faster, should they arise”.
Looking towards the second half of the year, “it will become clear for financial services firms over the next few months whether their technology is adequate for T+1,” Warren comments. Initial results are looking positive; a rise in affirmation rates and a reduction of fail rates has market participants feeling confident in the preparation work they’ve put into the transition
This success “speaks to the training and participation that went on ahead of time”, comments Rich Robinson, chair of industry trade organisation ISITC. The work done by DTCC is also credited by Warren as a key factor of the transition’s success; “[it has] been proactive in providing education and resources to ensure all participants understand the changes and adapt accordingly”.
That being said, “I would be surprised if there weren’t any bumps along the road” in the second half of the year, Warren says. “As with all changes, it will inevitably take the industry a bit of time to adapt to T+1, and it’s possible that we will see a spike in the number of operational glitches and additional costs for firms involved in the trading and settlement of securities.” The extensive risk assessments and stress-testing that companies were engaging with in the run-up to T+1 need to continue, he adds, along with in-house assessments to determine just how well firms are operating. Although the urgent go-live deadline has passed, there’s no time for the industry to sit back on its laurels.
Veiga also predicts “teething problems” over the next six months. “Operational resilience may not always be the most exciting subject matter that catches the headlines, but firms need to really renew their focus on planning for all scenarios so that if there are any hiccups, they can act quickly.”
Liquidity also needs to be considered, Warren notes; “Under T+2, firms had an extra buffer day to arrange financing for purchase obligations or shift funds between accounts to cover any shortfalls. The new one-day settlement system will require firms to manage liquidity more tightly, as there will be less time available to arrange this financing.”
Beyond the immediate impact of T+1 in North America, this process is being carefully watched worldwide as other jurisdictions adjust to fit into the new cycle. “The move is indirectly forcing other geographies to work in the US time zone,” Veiga explains, predicting that “it’s very possible that come December, fund managers based in Europe or Asia will find themselves having been relocated to the US.”
Timeframes on the buyside, particularly for European and APAC firms, was a significant concern going into the new settlement cycle, agreed Robinson. “There were challenges. Affirmations didn’t happen, Europe had issues with meeting deadlines that custodians had laid out.” Whether these problems are just initial jitters or a more long-term problem remains to be seen, and just how far-reaching their impact will be is not yet known. Robinson anticipates a “post-mortem” to take place at ISITC’s September conference, and is looking forward to a follow-up survey from The Value Exchange on the implementation.
Other regions who are considering also implementing shortened settlement cycles will be keeping a close eye on the North American transition too, noting what works and what doesn’t before they make any decisions on their part.
If any market participants were hoping that the T+1 discussion would die down after May 28th, their wish isn’t going to be granted. While the first major milestone has been met, there’s still a long road ahead.
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