deputy head of strategy, SunGard’s capital markets business

A DERIVATIVES DELAY? WHAT TO DO FOR THE NEXT 15 MONTHS

Posted by

Originally posted on FTF’s The Bull Run here.

Author: Tony Scianna, deputy head of strategy, SunGard

Last week we read that U.S. House Republicans voted to delay new derivatives rules by 15 months. Before we go into what this means for the derivatives industry, let’s take a look at how long 15 months really is:

  • 5 seasons will pass
  • We’ll all be 1.25 years older
  • U.S. citizens will be preparing to vote in the 2012 presidential election

    A lot can happen in 15 months. For an industry that has been facing an uncertain regulatory environment since the approval of Dodd-Frank last July, the proposed delay would only extend that uncertainty. I am concerned that with such a long period of waiting for regulatory guidance, the urgency of Dodd-Frank could diminish and leave firms feeling forced to sit back on their heels. Firms will have to reevaluate their strategies and budgets, and they may choose to focus their energy and investments in different areas rather than regulatory compliance. How long can lawmakers say “hurry up and wait” before firms “hurry up” and focus on something else? Firms need guidance to be proactive.

    While both sides of the political aisle have agreed that more time is needed to finalize the rules, there are big disagreements about what this proposed delay means.  On one hand, one side is arguing that they are “not repealing any rules… just setting a more deliberative rule-making process.” On the other hand, others are saying that “it’s not a bill to give the regulators more time—it is a bill to prevent the regulators from acting.”

    And then there’s the perspective of the regulators. CFTC Chairman Gary Gensler, who recently stated that the CFTC would not meet the original July 2011 rule-writing deadline, warned that a delay would put the U.S. “at great risk,” and that “reform will only be effective once rules are completed.”

    So what is a firm to do? Continue planning. Ensure that your approaches are flexible. Partner with your vendors to be sure your technology strategies are ready to tackle new challenges and reveal new opportunities. Talk to as many industry experts as possible. Participate in industry groups that are working to shape the end-state of the regulations.

    What is your take on the proposed Dodd-Frank delay? If we do wind up with a 15-month wait, what will your firm do with your budget for regulatory compliance in 2011? And will you be allocating the same, a bigger, or a smaller budget to regulatory compliance in 2012? I would encourage you to comment here, and to tell me your thoughts in person at SunGard’s New York City Day discussions on Pre- to Post-trade Implementation of Dodd-Frank and Regulatory Reform on June 20.

    While you’re here…

    5 Responses to “A DERIVATIVES DELAY? WHAT TO DO FOR THE NEXT 15 MONTHS”

    Leave a Reply

    • (will not be published)