senior vice president, Astec Analytics, SunGard’s capital markets business
Contributor: David Lewis
This blog post was taken from the Astec Analytics Securities Lending Focus for May 2013.
Trading venues require a number of different characteristics to function properly no matter what product or service is traded. “Liquidity” is an oft-quoted characteristic when describing an efficient market.
Market “liquidity” is where a given asset can be sold without causing a significant movement in the price and with minimum loss of value – otherwise defined as exhibiting equilibrium between buyers and sellers where a scarcity of either can lead to deflated or inflated prices, respectively. Just ask anyone looking to buy a house in London.
But what has this got to do with securities lending? A great deal in fact. ... read more
Contributor: Brendan Farrell
A version of this blog post was originally published by Wall Street & Technology.
Virtually every industry in every corner of the world has undergone technological or process evolution in recent times. There are countless examples of innovations that have addressed a challenge – the process takes too long, the process costs too much, the process is too risky – and changed the game by helping organizations or individuals operate smarter through efficiency, automation, or simplification.
Let’s consider communication, or the transmission of messages, as just one area where evolution has occurred. There are ways to communicate that involve quite a bit of manual work, such as the use of a carrier pigeon. Not the quickest way to transmit a message, and not too efficient, as apparently a carrier pigeon typically only flew in one direction – home – and would need to be manually taken to a message’s original location to begin the process. Given the level of difficulty and manual intervention required, it’s no surprise we don’t see the skies full of email or text message pigeons today.
On the flip side, if we look at a more modern messaging bird, it is evident that technology has changed the game for how individuals, organizations, and governmental entities can communicate and discover information. Twitter offers its users a simplified and efficient way to communicate specific messages to an audience across the room or across the world – pointing to why the social network has amassed millions of users in just a few years.
A similar, albeit less feathery, evolution is taking place within the corporate actions space today.... read more
Contributor: Daniel Parker
This blog post was originally published on TabbFORUM.
New rules have recently come into effect that have substantively changed the customer collateral asset protections relevant to central clearing.
Specifically, the Dodd-Frank Act prescribed that the CFTC adopt rules that provide for enhanced protections of cleared swaps customer margin collateral. The mandate is known as “legal segregation with operational commingling,” or LSOC. LSOC provides a fundamental change in how futures commission merchants (FCMs), as members of central clearing counterparties (CCPs), must manage customer margin collateral.
As a result of these rules, there was an initial flurry of activity to automate compliant processes. For instance, the first phase simply provided a bridge whereby FCMs reported excess collateral without reaching individual-customer-level granularity.... read more
Contributor: Daniel Parker
A version of this blog post originally appeared in Securities Lending Times (p 16).
The overarching mandate of financial reform is to mitigate the potential risks associated with systemically important financial activities and institutions. Statutory authority has purposely reserved an abundance of discretionary authority for the regulators to capture and reconfigure processes that have “an effect upon,” covered activities.
As a means of exercising this reservation of authority, rule-makers as well regulatory-framework-setting bodies now seek to target shadow banking.
For instance, the Financial Stability Board (FSB), which itself does not have rule-making authority yet is considered a persuasive advisory body concerning international standards within the financial system, seeks to “mitigate the spill-over effect between the regular banking system and the shadow banking system.”
Additionally, the Financial Stability Oversight Council (FSOC), which has rule-making authority under Section 120 of the Dodd-Frank Act, seeks to enhance and substantively modify the shadow banking space. The FSOC has concluded that the current state of shadow banking contributes to systemic risks. As a result, it now seeks to address the perceived bank-like activities that pose risks by subjecting shadow banking, and related activities such as money market mutual funds, (MMFs), and securitization activities to more onerous oversight. ... read more
Contributor: Beau Alexander
The full version of this blog post originally appeared in Wall Street & Technology. It also appeared on Bank Systems & Technology.
Today's economic environment has become increasingly difficult, forcing executives and managers to analyze expenditures and business practices with more scrutiny in an effort to remain profitable.
In addition to the expense of creating and maintaining an effective cost identification and management solution, broker-dealers are faced with the issue of the integrity of its results. Most financial services firms today are engaged in multiple businesses across global markets and with a magnitude of clients and business partners. Each new profit conduit is also an opportunity to add expense.... read more