Solutions: Post-Trade

deputy head of strategy, SunGard’s capital markets business


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This week I took a few minutes to ask Larry Thompson, managing director and general counsel at The Depository Trust & Clearing Corporation, what he is thinking these days regarding financial regulation. I gave Larry a handful of questions to answer, touching on Dodd-Frank implementation, regulatory uncertainty, and preparedness. Take a look at his responses and use the comments section to ask your own questions. What do you want to ask DTCC?

Tony Scianna: Larry, since we spoke earlier this year about financial regulation and the consequences of indemnification, what new developments has DTCC seen with regard to Dodd-Frank implementation, if any?

Larry Thompson: There have been some significant developments in the financial regulatory reform process recently. First, this summer both the CFTC and SEC announced that they were postponing the writing of many new rules so that each rule receives proper consideration and analysis—from both the agencies and the industry itself. I think this was an important step in ensuring that they get these new rules right.

The CFTC did finalize one rule recently that was of particular interest to DTCC, as it will govern trade repositories. Trade repositories are essentially large databases that aggregate and standardize OTC derivatives market data. The rule establishes the registration requirements for trade repositories as well as the core principles of these entities. The final rule provided clarity for market participants on a number of important issues, but at DTCC we’re concerned that certain matters, such as indemnification and the bundling of mandated regulatory services, have the potential to create unintended negative consequences. It’s another indication that for all the work that has been accomplished to date, there’s still a long road ahead for the industry.

Tony Scianna: DTCC currently provides market data to regulators globally. Why is the indemnification provision of Dodd-Frank so problematic to an SDR’s data sharing capabilities?

Larry Thompson: The provision requires third-party regulators, such as those in Europe and Asia, to indemnify U.S.-registered trade repositories before obtaining critical market data from them. This is problematic for several reasons.

Foremost, many foreign regulators will be unable to grant indemnity to U.S. trade repositories. This could prevent repositories from sharing information with global supervisors, which is the objective of these regulatory initiatives. As a result, European and Asian regulators would have little choice but to create their own national or regional repositories – and this will fragment what should be a single global set of data.

The CFTC’s final rule provides several methods for regulators to access data stored in U.S. trade repositories, but it doesn’t adequately address the problem because of the strict letter of the law.  Congress is going to need to address this issue in a technical corrections bill, but in all likelihood that won’t occur until after the 2012 U.S. Presidential elections. In the meantime, we’re working closely with lawmakers in the European Parliament to help develop sound public policy that will harmonize the relevant guidance and practices of U.S. and other nations in the future.

Tony Scianna: DTCC has expressed concern recently about the need to reinforce the principles of “user choice” and “open access” with regard to counterparty selection of a trade repository and data reporting. Can you explain this position?

Larry Thompson: User choice and open access are deeply embedded in both the letter and spirit of Dodd-Frank because these principles are critical to protecting the integrity of the trade reporting process and the quality of the data that’s collected.

Let’s look at the issue of user choice first. Dodd-Frank empowers the parties to a swap to report information from that transaction to a registered trade repository. Unfortunately, the final rule appears to allow the trading platforms and/or clearinghouses to contractually require reporting of data to a particular trade repository. In other words, counterparties will lose their freedom to choose.

In addition, the final rule appears to permit the vertical bundling of mandated regulatory services, such as trade execution, clearing and trade reporting. This is highly problematic because it will frustrate free market competition and create an unlevel playing field, favoring infrastructure providers that offer multiple mandated services over those that offer only one such service.

On the issue of open access, we believe it’s essential that trading platforms, clearinghouses and trade repositories interact with one another on an impartial basis and ensure interoperability. If any party refuses or delays linkages with another provider, even when there is customer demand for it, this lack of connectivity will prevent the free flow of data and result in an incomplete data set, which would paint an inaccurate and potentially distorted picture of the market. We are working with the regulatory agencies to address these issues.

Tony Scianna: From your perspective, has the sense of urgency surrounding regulatory readiness diminished among firms?

Larry Thompson: Quite the contrary. Financial firms realize they need to be ahead of the curve in complying with new regulations to ensure their competitiveness in the new regulatory landscape. However, the extended timeframe for implementing Dodd-Frank has created a level of uncertainty for many market participants.

A large part of this stems from the fact that many of the key terms contained in Dodd-Frank, such as “swap,” for example, have yet to be defined. Additionally, some of the most controversial rules, including the end-user exemption, remain unsettled. Once these and other issues are addressed, firms will be in a better position to respond to and prepare for compliance with the new rules.

Tony Scianna: As the implementation of Dodd-Frank continues, where do you feel financial firms should focus their efforts and budgets in the coming months?

Larry Thompson: The industry needs to remain fully engaged in the rulemaking process so they have the ability to shape the final regulations. Cooperation with our regulators is essential. They have an enormous task ahead of them, and they need input from the industry to avoid unintended consequences. In order to ensure that new rules are properly crafted, regulators and the industry need to continue communicating with one another and market participants need to provide insight on how the new rules will impact the competitiveness and efficiency of our financial markets, capital formation and long-term economic growth and job creation.

global head of strategy, SunGard's capital markets business


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We recently recorded several podcasts with industry analysts to discuss current trends and challenges facing the capital markets. One was with Kevin McPartland, principal and director of fixed income research at TABB Group, who spoke about regulatory reform and its impact on capital markets.

SunGard’s own Brenda Mickiewicz, senior manager of analyst relations, sat down with Kevin to ask him about his views on data management, risk strategies, OTC derivatives, and the benefits of regulatory reform developments. Kevin mentioned several points that echo my own sentiments:

  • One of the biggest goals of financial regulatory reform is transparency, and a significant part of that is data. Kevin says that where you get it, who you get it from, and what you do with data are all important. I agree. The need for accessible, enterprise-wide data is key; however, the quality of the information is the most critical factor to satisfying new regulatory demands on a global scale.
  • To say that regulatory reform is incredibly complex would be an understatement. Reading about it in the news only conveys a surface understanding of its complexity; when you speak with the person responsible for one specific area at a firm and hear about his or her unique challenges, then talk to another person in another area, you begin to see how complicated the regulatory changes are going to be since they span so many previously separate departments. Implementation simply cannot be rushed – the changes are too all-encompassing.
  • Regulatory compliance projects will lead to many innovations. With sweeping changes on the horizon, capital markets firms will seek new ways to gain a competitive edge. As Kevin says, this will open up opportunities to innovate across all aspects of financial technology. Our automation and processing expertise in listed instruments is already being utilized in the OTC area. Some of our customers are even leveraging geographical advantages. We are committed to being a part of this industry innovation partnering with our customers who are leveraging our expertise across the globe.

With the road to regulatory reform continuing to be an uncertain one, speaking to industry experts like Kevin can help you understand how best to capitalize on change. Listen to this podcast on regulatory reform and respond with your own questions about the challenges and opportunities that lie ahead.

While you’re here…

deputy head of strategy, SunGard’s capital markets business


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Despite continuing uncertainty around global rules implementation, firms should be taking an adaptable approach to data management in order to minimize regulatory risk. This means looking at how 2011 budgets have or have not been used, assessing the flexibility of data management technology, achieving an enterprise-wide view of activities and exposures, and more. With this in mind, I have identified 10 key trends involving regulatory risk that touch upon transparency, efficiency, and networks.

I’ve included the full list below. Are you paying attention to these 10 trends in regulatory risk?


  1. Regulators will require firms to report a greater breadth and depth of up-to-date information, possibly on demand, to assist their efforts to reduce systemic risk and increase transparency.
  2. Firms will need to be able to capture relevant data in as close to real time as possible, standardize it, and have access to it 24/7 for reports to relevant agencies and their own management.
  3. The development of Legal Entity Identifiers will be the first of many projects on which industry groups will coordinate for a single response to regulators.


  1. Firms will need to focus on solutions that will transform their business process for data management as well as migrate away from traditional batch-based processes.
  2. To help manage costs, firms will look for off-the-shelf, flexible and easily adaptable technology frameworks to help them meet whatever regulatory requirements develop.
  3. The cost of clearing and expense associated with additional regulations in certain highly regulated asset classes will rise, which might negatively impact profitability.
  4. Budget that was allocated in 2011 but unused due to continued uncertainty may be re-evaluated. Firms may not allocate the same level of funding in 2012, potentially leaving them under-budgeted when the implementation details are finally confirmed.


  1. The borders between geographies, asset classes and lines of business will continue to break down as regulators and management demand an enterprise-wide view of activities, risk and exposure.
  2. Regulators will continue to cooperate with each other, and regulations will expand beyond initial scope wherever authorities adopt rules that are introduced in other jurisdictions.
  3. Differences between regulatory regimes will continue to exist. However, regulators – with support from the industry – will aim to reduce regulatory arbitrage by working toward common goals of greater market oversight, stability and transparency.

head of post-trade securities, SunGard's capital markets business


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In the following video interview with Finextra, I discuss several trends and challenges facing the middle and back office in the securities industry today.

Some of the key topics covered in the video are:

  • What an increase in cross-border or “borderless” trading may mean for the middle and back office.
  • The focus on increasing interoperability of CCPs.
  • New questions that post-trade securities professionals are asking in response to the tsunami of regulatory changes.
  • The need to evaluate and simplify the flow processes and data to get a competitive edge.

Please view the video and share your thoughts in the comment section below. What other trends are you seeing in the post-trade securities industry?

While you’re here…

deputy head of strategy, SunGard’s capital markets business


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Author: Tony Scianna, deputy head of strategy, SunGard’s capital markets business

I love music. I’m a big fan of jazz, blues and rock & roll. While I was listening to some vintage vinyl the other day, I began thinking how every great song has a powerful hook – a lyrical or musical phrase that catches your  ear, makes you start tapping your feet and stands out in the song. How does this fit into a capital markets blog? It struck me that I have been trying to catch the ear of anyone who will listen and tapping the tables with a hook of my own: Data management is one of the key initiatives that must be addressed in order to handle all of the upcoming regulatory reform. Read more»

global head of strategy, SunGard's capital markets business


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Earlier this month, I attended SunGard’s London City Day, and the event’s many interesting conversations really got me thinking. The event’s sessions covered topics from OTC clearing to CVA, securities finance to collateral management, but all with an underline on regulation and what this will mean for firms everywhere.

One thing in particular that struck me is our regulatory vocabulary. If you stop and think about it, it is remarkable how powerful words actually are. The words we use to define and think about these complex issues can not only help us make sense of the regulatory changes but also complicate or confuse.

For example, Read more»


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Guest Author: Larry Thompson, managing director and general counsel of The Depository Trust & Clearing Corporation

I had the pleasure recently to speak at SunGard’s New York City Day and focused, in part, on a little known provision of Dodd-Frank, known as indemnification, which is gaining traction as a key issue in the broader debate for enhanced international regulatory harmonization. Swap data repositories (SDRs) are essential to bringing transparency to the market, and indemnification is intended to ensure the confidentiality and safety of data they hold and report—a laudable goal by any standards. But this provision may prove to be more complex – and potentially damaging – than envisioned.

The requirement says that U.S.-based SDRs need to obtain indemnification from foreign regulators prior to sharing critical market data with them. The fact is the overseas regulators we have met with have confirmed they are unlikely to enter into these agreements for two reasons:

  1. The extraterritorial mandate is inconsistent with traditions and legal structures in Europe, and
  2. Many global regulators are already following policies and procedures to safeguard and share data based on guidelines established by the OTC Derivatives Regulators Forum (ODRF).

We’ve been playing close attention to this situation because if the indemnification provision is not revised or eliminated, it has the potential to undermine the ability of regulators and market participants to obtain a comprehensive and unfragmented view of the global derivatives marketplace.

The indemnification requirement will threaten the ability of repositories to provide this aggregated view of the market. The clear risk is that it may encourage third party countries to create regional trade repositories, which could undermine global reform efforts by limiting the ability of regulators to quickly and efficiently review aggregated, comprehensive position data for counterparties and underlyings, especially during times of crisis.

Some members of Congress have already begun outreach to their European counterparts to seek a resolution. But the clock is ticking. The European Parliament is poised to adopt counter indemnity language in the final version of its own derivatives reform legislation, which would result in U.S. regulators, like the CFTC and SEC, facing diminished access to information held in overseas repositories – just like their overseas counterparts in the U.S.

Chairman Gensler recently testified before the House Financial Services Committee that the CFTC and SEC agree that indemnification is problematic and suggested two potential exemptions to the enforcement of the provision. The first exemption would apply to situations in which a foreign regulator (third party) requests data from a repository that has dual-registration with regulators in the United States and overseas. The second would apply when a foreign regulator (third party) seeks to obtain information that is held by the CFTC or SEC.

This issue is clearly on the radars of the U.S. agencies, but we believe that more needs to be done. The legal language in Dodd-Frank leaves little room for the regulators to work without Congressional intervention – and the exemptions, while well intentioned, do not solve the problem.

At DTCC, we’ll continue to work closely with lawmakers and regulators in the U.S. and Europe to address this matter because one thing is certain – if no action is taken, transparency for global regulators will be reduced, creating precisely the type of opacity that Dodd-Frank and EMIR have sought to eliminate.

Larry Thompson is managing director and general counsel of The Depository Trust & Clearing Corporation (DTCC), a non-commercial market utility that serves as the primary post-trade infrastructure organization for the U.S. capital markets.

president, SunGard’s capital markets business


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Since becoming the president of SunGard’s capital markets business in January, it’s become even more apparent to me that to be an effective leader, you must be able to see the big picture. This may seem like an obvious statement, yet many often focus on small problems or tasks, missing the larger issues.

Take this 1999 experiment, which tested selective attention. In the experiment, participants were asked to watch six people throw basketballs to each other, three of whom are wearing white shirts and three of whom are wearing black shirts. The participants were then asked to count the number of times a ball was passed between the basketball players in white.

Try the experiment for yourself.


You counted all the passes, right? But did you notice the gorilla? In the experiment, because the participants were asked to focus on one small thing, about half didn’t notice a person in a gorilla costume enter the scene, thump his chest, and leave.

Now switch gears and imagine the gorilla is a critical issue in your business. Imagine the gorilla is a solution to a systemic problem. Imagine the gorilla is the key to connecting the dots in your firm’s response to global regulatory reform. What would happen if you missed seeing it?

How can a leader be sure to see the gorilla?

  1. Search for the story: An effective leader cannot be satisfied with only solving quick, small problems. A leader must recognize that beneath one small problem, there may be a larger story with bigger challenges to solve. As the leader of a large new financial systems business that combines a wealth of solutions, talents and resources from three former businesses, I am focused on seeing the big picture among my staff and our customers.
  2. Ask more open-ended questions: If you called your doctor and told her you were having trouble breathing, what would she do? She wouldn’t phone in a prescription on the spot; she would ask questions to get to the root of the issue, identify a diagnosis and then recommend treatment. It’s the same with our industry. A risk management or securities lending challenge doesn’t exist in a vacuum or within a silo – it is the job of a leader to ask the right questions and listen to “diagnose” the deeper or more systemic issues that need solving.
  3. Use a visual: A picture can tell a thousand words – or at least get people talking. Using a visual representation of a business challenge can be a powerful way to draw out the full story to arrive at the full solution. How many times have you sat in a meeting and found that a chart, a few scribbles on a whiteboard, a video, or even an infographic provided the context for the right conversations?
  4. Paint the picture: Once a leader hears how customers, partners or employees tell their “story” about the challenges they face or solutions they need, it is his job to take those elements and paint the picture to help find the answers. It is his job to see the whole story and not get caught up in any one small detail. It is his job to see the gorilla.

How do you ensure that you don’t overlook critical issues in your business? Where do you believe you may be looking too closely at a problem?

While you’re here…

  • Find out how SunGard sees the big picture in the capital markets
  • See how a visual can start a conversation about unlocking the value in operations

head of post-trade securities, SunGard's capital markets business


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Author: Alex Walker, head of post-trade securities, SunGard

As the speed and content of information dissemination increases, we adapt or lose our competitive edge.

Legend says that in Ancient Greece, after the battle of Marathon, Pheidippides ran about 240 km from Athens to Sparta to deliver word of the Greek victory over Persia. According to the story, when he arrived in Sparta, Pheidippides announced “Νενικήκαμεν” (We have won), then immediately collapsed and died from exhaustion. Even if Pheidippides needed to deliver the same message a few decades ago, he likely would have relied on a fax machine. Today’s communication expectations might be a text message sent to the Spartan army in mere milliseconds – and the texter could survive the process!

A similar evolution is happening now in the world of fixed income processing, which means that you’ll have to adapt and automate.

Fixed income has historically been an OTC market, and most of the purchasing has been of high value/low volume trades. Middle- and back-office processes have typically been relatively manual and boutique, with many Excel spreadsheets and fax messages. Until now.

If you are a regional/international fixed income brokers, you need effective and efficient communication and matching with other market participants, providing you with liquidity to offer your client base. And in terms of client service, automating your confirmations and allocations processes, be they fax-based, email-based, or increasingly electronic, enables you to improve your SLAs with your clients and differentiate yourself from the competition.

By adopting an automated approach to your fixed income operations, you can arm your front office and clients with timely and accurate information, support changing electronic processes in the international markets, enabling the front office to expand its offering and keeping your competitive edge.

So, what does the future hold? The growth of electronic markets, new regulations, central counterparties, volatility in volumes and exposure management all play a role in the new and challenging environment facing the fixed income markets. To best prepare for the future now, it comes down to achieving automation and efficiency, leaving manual process “marathons” in the past.

While you’re here…

deputy head of strategy, SunGard’s capital markets business


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Author: Tony Scianna, deputy head of strategy, SunGard

Today I participated in a Twitterview – a real-time interview via Twitter – with John Lothian, owner of John J. Lothian & Company, Inc. and founder of the John Lothian Newsletter and MarketsWiki. As SunGard’s New York City Day is around the corner and we are both speaking on panels focusing on financial regulatory reform, we thought it would be fun to give a preview of some of the hot topics on Twitter.

During the Twitterview, John asked me about global regulatory reform and asked some big questions regarding what market participants should be focusing on and what might happen due to delays in rulemaking. John opened the interview by asking me, “What are the biggest questions on people’s minds today about regulatory reform?” How would you have answered that question?

If you missed the Twitterview when it happened live, you can read the interview here or in Twitter Search under #TENfs. And if you have your own answer to one of the questions or want to ask something new, leave a comment for us below.

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John Lothian: Let’s get started with today’s #TENfs Twitterview with @tonyscianna

Tony Scianna: Thanks @JohnLothian, let’s get to the questions #TENfs

John: What are the biggest questions on people’s minds today about regulatory reform? #TENfs

Tony: The questions are still around uncertainty, timing and guidance. Firms want to know how to plan. #TENfs

John: How prepared – or not prepared – are market participants for the new rules? #TENfs

Tony: TABB found only 40% firms trading OTC deriv are prepping for #finreg Over time, what will this # turn into? #TENfs

John: What about delays for #derivatives rules? How will this affect firms’ regulatory readiness? #TENfs

Tony: The question is how long can lawmakers say “hurry up & wait” before firms “hurry up” and focus on other priorities? #TENfs

John: What are some critical areas where firms need to better prepare for #finreg? #TENfs

Tony: In my opinion, critical areas are management, collection of, access to data that regulators will need #TENfs

John: Amidst the uncertainty and change, what opportunities are there for market participants? #TENfs

Tony: Big changes can bring about new innovation. However, time will tell where the real opportunities are. #TENfs

John: What do you believe the next few years will bring? What will our global financial markets look like? #TENfs

Tony: Wouldn’t it be nice to have a crystal ball! I do believe regulators must strive to grasp increasing globalization of industry #TENfs …

Tony: …and focus on taking this time to get it right. #finreg #TENfs

John: Recent @TabbFORUM study found “Regulatory uncertainty cited as key factor in lack of preparation.” How can firms gain clarity? #TENfs

Tony: The most useful ways to gain clarity are by listening to industry groups & participating directly wherever you can #TENfs

John: I know we’ll all be in #NYC for SunGard New York City Day on June 20. What are you speaking about at the event? #TENfs

Tony: Pre- to post-trade implementation of #DoddFrank & global financial reform: #TENfs

John: Great, @tonyscianna. I’m speaking re #DoddFrank in context of risk management. See you there #TENfs

Tony: Thanks for interviewing me today @JohnLothian. See you on Monday for New York City Day #TENfs

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While you’re here…