Author: Tony Scianna, executive vice president, SunGard’s brokerage & clearance business
Two commentaries on regulatory issues caught my eye while I was catching up on some reading recently.
The first was a column in Securities Industry News in which editor Tom Steinert-Threlkeld argues that firms must create solid processes and procedures for establishing the value of assets. I agree with this stance and believe we’re going to see more cases like Nomura International’s experience that he touches upon in the article. When it comes to prioritizing valuation, in 2010 I think we’ll see an emphasis on firms having to show real-time records of how they reached each valuation.
But how many firms are preparing to do that – and how many are able to do it now? For more on this topic, see this previous post regarding my thoughts on real-time records.
Meanwhile, I read that Andy Lo of MIT testified in front of the U.S. House Financial Services Committee about the related issue of systemic risk. You can find the full testimony on his Website, but I’d like to mention a few of his points.
First, he says the highest priority for regulatory reform should be establishing the means to objectively and quantitatively measure and monitor systemic risk on an ongoing basis. He believes this will involve providing transparency around assets, liabilities, collateral, liquidity, etc. (rather than position transparency) and says this information should already be available from existing enterprise risk management systems. Is it?
He also acknowledges the importance of the infrastructure that will collect, clean, analyze, organize and store this data. Can your technology perform these tasks for data?
Are you focusing on asset valuation or another issue related to systemic risk? And what lessons should we be learning from cases like that of Nomura International?