Conflicts of Perception
One of the largest changes in European markets for a long time happened this month, and nobody really noticed. For those unaware, Europe shifted its settlement cycle to T+2 in anticipation of requirements in the Central Securities Depository Regulation (CSD Reg), standardizing and harmonizing the cycle from its previous T+2/T+3 blend.
And what happened? Nothing. No reports of abnormal settlement fails ─ if anything, volumes were higher than normal, too ─ no major screw-ups. Not a dicky bird.
All of which is good, right? It shows that people can work together effectively when they need to, and it gives a bit of a boost to the beleagured European Commission, which hasn't had the rosiest reputation for stable financial overhaul over the past decade. Given the hubbub in the US about T+2, too, with the Depository Trust and Clearing Corporation (DTCC) taking the lead (albeit through committee), it's encouraging that it can work as well as it does among EU states. Except for Spain, of course, which isn't tackling it until 2015.
On a related market-structure note, regular readers of Sell-Side Technology may be interested to give Dan DeFrancesco's feature on the consolidated audit trail a read, along with his accompanying analysis piece looking at how fair it really is that Finra can be both a contestant in and arbiter of the bidding process.
The regulator protests that Chinese walls keep it all separate, and there's no reason to doubt that ─ the US Securities and Exchange Commission, after all, hasn't been shy about fining Finra in the past, so it's in its best interests to keep them separated. But as with so many other areas, in finance, it's the perception that can be the killer, rather than the reality.
Just look at the row over central counterparties (CCPs), and the systemic risk they supposedly present, if you believe JPMorgan and a (fair) few others. Nobody is saying they're perfect, but there are elements of hyperbole that go into this, such as recent stories in Waters' stablemate Risk that have Fed officials criticize the secondment of traders to a CCP in the event of a bank default, so as to hedge positions quickly. It can never work, they say in one breath, then point out that this happened at LCH.Clearnet during the Lehman collapse with the other.
The point is that for such a deeply intellectual field as investment banking, it's strange that so much is driven by how people see things on the surface, and how often this perception obfuscates the beneficial role that market elements such as CCPs can introduce. Yes, there are cogent arguments for CCPs transitioning to not-for-profit status, but the more hysterical sides of the debate are a little overwrought.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@waterstechnology.com or view our subscription options here: http://subscriptions.waterstechnology.com/subscribe
You are currently unable to print this content. Please contact info@waterstechnology.com to find out more.
You are currently unable to copy this content. Please contact info@waterstechnology.com to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@waterstechnology.com
More on Regulation
Consolidated tape hopefuls gear up for uncertain tender process
The bond tapes in the UK and EU are on track to be authorized in 2025. Prospective bidders for the role of provider must choose where to focus their efforts in anticipation of more regulatory clarity on the tender process.
Fighting FAIRR: Inside the bill aiming to keep AI and algos honest
The Financial Artificial Intelligence Risk Reduction Act seeks to fix a market abuse loophole by declaring that AI algorithms do not have brains.
Waters Wrap: The rise of AI washing… and regulation washing?
The SEC recently levied fines against two investment advisors over “AI washing”. Anthony takes issue with the announcement.
Prepare now for the inevitable: T+1 isn’t just a US challenge
The DTCC’s Val Wotton believes that firms around the globe should view North America’s move to T+1 as an opportunity—because it’s inevitable.
European firms prime for lopsided settlement in North America and at home
With T+1 imminent in North America and increasingly likely to traverse the Atlantic, operations and trading professionals in Europe are fighting on two fronts.
As crypto ETFs become reality, benchmark providers take center stage
The SEC’s approval of the first spot bitcoin ETFs will expose a growing number of traditional market participants to the maturing world of crypto data, a moment that some—such as CF Benchmarks, BlackRock’s benchmark provider—have been eagerly awaiting.
Waters Wavelength Podcast: Looking into the EU regulatory landscape
Eflow’s Ben Parker joins the podcast to discuss EU regulations.
FCA declines to directly regulate market data prices
A year-long investigation by the UK regulator to determine whether competition is hindered in the wholesale data markets has concluded with its decision not to directly regulate much-maligned data pricing and licensing structures.
Most read
- Women in Technology & Data Awards 2024: All the winners and why they won
- Witad Awards 2024: Above and beyond award (vendor)—Susan Bennett, Tradeweb
- Dark horse: Deutsche Börse building dark pool