By Lisa Iagatta
September signifies transformation, and particularly so in my hometown of Boston. As we move from summer to the crisp days of autumn, there’s no better time to have held our annual Fall Forum, where we had an opportunity to reflect on the changes occurring in financial services operations.
We held our conference in Baltimore on September 15-17, hosting engaging speakers that led discussions on key topics including LEIs, the political landscape in Washington, data security, and digital assets, to name a few. No matter the issue discussed, speakers and audience members were clear on one thing: The disruption in our industry is real, and to be successful, firms need to adapt now.
This is something many leaders have stated. However, as we progress in our use of technology in our industry, and as new regulations and policies impact our day-to-day work, the need to act has never been more urgent.
Technologies such as AI, blockchain, cloud, and cryptocurrencies have been buzzwords for a while, but they are becoming a reality in our industry.
For instance, part of our Investment Manager Forum explored digitally native securities and the updates taking place around the world. Switzerland has become the leading jurisdiction for crypto and digital assets, and SIX, its Swiss Exchange, has created a Swiss Digital Exchange (SDX) planned to be up and running in a year. This means firms will have to understand how to support hybrid models, with traditional methods for custody, settlement, and reconciliation demanding a second look.
In another session, Jacob Lesser, Associate General Counsel at Municipal Securities Rulemaking Board (MSRB), shared the example of moving “EMMA,” its real-time trade market data website, to the cloud. He said that board agreed on the move to enhance services on EMMA, improve big data analytics, and use AI to unlock information within the application. This demonstrates the snowball effect of technological disruption, where new technology can further build on efficiencies and streamline formerly convoluted processes.
Speakers on the panel “Seeing Regulation with 2020 Vision: An Exploration of What Lies Ahead” touched on what innovation means for cybersecurity. Laura Astrada, Executive Director of Global Public Policy for DTCC, said there has to be an increased focus on cybersecurity practices based on the innovation taking place in financial services. Mark Montoya, Senior Business Analyst of Data Strategy at Federal Deposit Insurance Corporation (FDIC), agreed, adding that there’s no such thing as data privacy anymore, and organizations need to be smart about the data they collect, especially in light of the significant impact of the General Data Protection Regulation (GDPR) and California’s upcoming privacy regulation.
Regulatory and political disruption
As Pete Schroeder, Reuters Correspondent, stated on the “The Media’s Roadmap: Getting the Pulse in Washington” panel, “Every day in the news cycle is a full-on sprint.” With an upcoming election in 2020, Brexit still looming, and regulations with impending compliance dates forcing us to revise how we go about our daily business, there was plenty of material to discuss at our conference.
The transition away from Libor was of particular interest. This stands to impact five currencies and will take place in 2021. Although it seems we have ample time to transition to an alternate rate, like SOFR, banks need to start preparing now. William Troost, Financial Services Counsel at Bloomberg LP, said, “Don’t wait to transition for Libor. You need to start now and have a task force to assess outside risks and manage market exposure.”
Another regulation that piqued the interest of attendees was the General Data Protection Regulation (GDPR). Our Regulatory Forum highlighted that since the regulation was first implemented in May 2018, the fine count has tripled, growing from three major fines in 2018 to nine in 2019. It’s affecting companies of all types. The amount of data that we consume and dispense daily is almost insurmountable, meaning that data security measures need to be tight in order to comply. With firms getting fined millions of dollars for noncompliance, this is not a regulation that they can afford to avoid.
Harmonization is the way forward
There’s an answer to adapting to all the disruption facing our industry: Harmonization. Whether it’s harmonization across disparate systems, with regulators, or with industry peers, it will surely be the way forward as we overcome the obstacles in our path.
Based on what I heard at the conference, those creating policies and standards are cognizant of this fact. In Karla McKenna’s ISO/TC 68 update, she acknowledged the committee has concentrated on developing standards that can help the entire financial services ecosystem, serving fintechs, global regulators, and the broader financial services community. Jacob Lesser also said that MSRB is taking a retrospective look at the rules they’ve made to ensure they’re understandable and harmonized with other groups. For example, MSRB is similar to Finra based on the professionals they address. As a result, MSRB has coordinated its rules with those of Finra to make sure it’s not creating duplicative burdens or conflicting compliance requirements.
During his session, Nick Hart, CEO of Data Coalition, emphasized the need for the federal government to collaborate on data policies. He said although this collaboration is certainly challenging, it will be critical if we want to keep evolving our federal policies to better use and analyze our data, which will then support evidence-based policymaking.
From my observations as Chair of ISITC, and echoing the takeaways from the Fall Forum, I see no way forward as an industry other than harmonization and collaboration. This sentiment and the unity we champion is the core of our organization and has allowed us to share information with industry peers and create best practices that have boosted efficiencies and propelled securities operations forward.
Thank you for making this continued industry-wide collaboration possible. I am confident it will strengthen our industry in the face of disruption. If you’re interested in becoming involved in ISITC to prepare your firm for the future, email us at email@example.com or learn more about becoming a member here.