SIFMA 2011: Varying Thoughts on Dodd–Frank

At the Sifma conference this year, opinions of how the Dodd–Frank Act is affecting the buy side varied greatly.

Here are a few of those opinions:

Paul Baram, director of client services for financial and risk solutions at OpenLink:
"Where it gets most murky for the buy side is for clients trying to get their heads around what Dodd–Frank means to them. If you're on the sell side, you're going to be participating and you're used to moving data around in FpML and you've got connectivity to all these players and you've got huge IT budgets. On the buy side you don't have big IT departments and you don't typically have depth of knowledge to understand what these requirements mean. The question we get asked all the time is, ‘What do your other clients that look like us feel about these changes?'"

Mark Israel, vice president of business consulting at Sapient:
"The most vocal complaint we hear is the cost of collateral management and complexity around that. That's basically going to reduce their ability to generate returns. There are even firms that are saying, ‘I don't trade a lot of derivatives, maybe I should just cut that business out because the cost of the collateral alone will make it not worth the return. That's not the popular view, but there are a handful of firms questioning whether to stay in the derivatives business."

David Merrill, CEO of FinAnalytica:
"For the buy side, some of the legislation is not starting there as early as it has on the sell side, but we are seeing people continue to recognize that whatever they're doing in the risk management area—it needs to be more. It seems like in Europe there's more direct, specific requirement for the buy side—for example, Ucits IV. In the US, however, it's not as direct. But I think we are seeing people be more aggressive about evaluating what they're doing and generating a plan of action around their situation."

Alexei Miller, executive vice president of DataArt:
"Contrary to a lot of popular belief—specifically on the buy side in the asset management space—regulatory reform is not such a huge spend burden. Most of the work we see is improving the foundation, improving time-to-market and agility, but not in the compliance space—that is not driving tech spend. The money is being spent on catching up after sitting out for most of 2009 and 2010, and I expect there to be more spending on the fund administration side. But it's not about spending on regulatory changes that haven't even been implemented yet."