Lessons from the Buy Side

Grousing about the sell side is one of the favored topics in buy-side conferences, as anyone who's attended a number of them will attest. While right now it isn't quite the open-war feel that has pervaded the industry at times, there are occasional flash points that do occur, and this was highlighted at last week's Buy-Side Technology European Summit.

Chief among the digs was the issue of delegated reporting, specifically for the European Market Infrastructure Regulation (EMIR) mandates that came into force in February.

Senior buy-side execs complained that the sell side is opaque when it comes to opening up to clients about their systems, processes and people behind delegated reporting. Which is understandable, they have a duty of care to their clients and a responsibility to ensure that everything is up to snuff, which includes knowing how and what is being done in their name. After all, buy-side firms are still responsible for the accuracy and quality of their reports, even if they hand it off to someone else as a part of delegated reporting.

Complaints also came from other areas ─ even the regulators ─ about the ability of firms to view their data on trade repositories in an efficient manner, the common theme being that highly manual processes of reconciliation with a firm's own financial data had to take place in order to be sure that the numbers were correct. The UK Financial Conduct Authority, said one of its representatives, would be looking into this alongside the European Securities and Markets Authority.

Ooh-er.

Given the mess that reporting has been, contrary to the ever-sunny opinions of drone-like press statements from higher authorities, it seems there needs to be a bit of give and take between both sides.

You have to have a little sympathy for (in the case) the devil though. I can't imagine that buy-side firms would be particularly happy disclosing the location of their servers, details of their people and other highly confidential processes to their sell-side counterparts, either. But given the mess that reporting has been, contrary to the ever-sunny opinions of drone-like press statements from higher authorities, it seems there needs to be a bit of give and take between both sides. Meaning, it's not something that can just be chalked up to conference speakers being cabbaged, and therefore a little grotty with the absent party.

Indeed, the myriad problems that are still ongoing ─ trade breaks through an inability to match between different trade repositories, a lack of standardization, confusion over unique trade identifier generation and other areas ─ would still point to a malfunctioning system for both the buy and the sell sides. One which is only going to be exacerbated, come August, by the need to report collateral and valuations, too.