ISITC Winter Forum: Change Requires Tighter Industry Collaboration

A few weeks ago, we wrapped up our Winter Forum, our last event of the year. Given the snowfall in the Northeast, I will be the first to say that the sunny beaches of Palm Beach were a sight for sore eyes!

This was one of our most well-attended Winter Forums, with many new members and first-time attendees, with an agenda chock-full of thought-provoking topics and engaging speakers.

ISITC has an important role to play in helping firms through significant changes coming to the market in the next few years. It’s going to require the type of collaboration and vigorous discussions that are the hallmark of our organization. Remaining engaged with the key issues facing our industry is half the battle.

For those of you who didn’t have the chance to attend, I wanted to jot down a few specific takeaways below from the general sessions.

CSDR compliance will require tight coordination between all parties

Our first general session took a deep dive into Central Securities Depositories Regulation (CSDR), which may have set a record for most questions asked during a presentation!

We were grateful to have Spencer Schulten from financial services consultancy Capco provide an overview of the regulation and where the industry stands, moderating a panel that included perspectives from the vendor, custodian, and asset manager point of view. The general consensus, given some of the ambiguity surrounding CSDR’s final form, it that it’s going to require all members to work closely together to ensure a smooth track towards compliance.

Anecdotally, the custodian point of view on the panel commented that in their early analysis, they’re seeing about 10,000 trades monthly that will need to be addressed under the regulation. For the custodians, many are seeing the need to build or buy separate platforms to track and handle trades that are in scope. For the asset managers, it’s less about building platforms, and more about providing the right pre-trade data to the custodian to help them limit the number of failed trades.

Mandatory buy-ins are a key piece of the regulation that the industry is still grappling with. And while it’s a bit of a moving target, we will be looking towards other industry groups that have been tracking this for insight. The International Capital Markets Association (ICMA) has been the leading organization tracking the impact of CSDR on industry participants. The IMCA recently updated its buy-in rules to support mandatory buy in provisions under CSDR and launched an impact study based on a survey of its membership, which I’d encourage you to check out.

Operationalizing the transition away from Libor

We were pleased to bring in Jenn Hafemann and Prakash Mahtani from PwC to lead a discussion on the transition to SOFR from Libor and what it means for the asset management community.

While the Libor transition has been a much-discussed topic in various pockets of the industry, it was great to dive into the implications for operations teams. As an organization that focuses on “where the rubber meets the road,” it was great to see practical guidance for operations teams, and what they can do now to prepare for the operationalization of a transition to SOFR, or another alternative rate.

Keeping an eye on Crypto assets

Rounding out the general sessions, we had our resident blockchain and crypto guru Jason Ward provide an overview of where the industry is today, what the future may hold, and what it means for ISITC members.

The conversation around blockchain and its eventual industry impact is fascinating to track. Beyond cryptocurrencies like Bitcoin, the concept of digital assets and asset tokenization, is gaining steam as a viable use case for the technology. Jason highlighted a recent Fidelity survey of 400 institutional investors that drove this point home. Nearly half of institutions surveyed viewed digital assets as being similar to an alternative asset or its own asset class in itself. This trend is real, and is something the industry should be taking seriously.

Blockchain has been something we’ve committed to tracking very closely for our membership. It’s becoming clear that ISITC needs to take another step forward to think about how we can support hybrids of traditional and digital securities, and we’re grateful to have a wealth of knowledge within the membership that can keep us moving in the right direction as these conversations start to unfold.