TCS Capital Markets Forum | PJ Di Giammarino The long road ahead
Navigating the regulatory maze will not be easy, especially when the ink is not yet dry on the final details. However, as PJ Di Giammarino, CEO of independent think-tank JWG, puts it, the one thing that institutions will need is an effective game plan to tackle the operational burdens.
March, the majority of the provisions of the EMIR regulatory technical standards, dealing with the issue of timely confirmations, will have entered into force. This means that firms need to begin confirming and reporting unconfirmed trades, as well as mitigating risk according to new client classification requirements.
“One of the greatest challenges for the buyside is to spot both the similarities and deltas between the various pieces of regulation.”
Getting ready is not an easy task, especially in light of the swathe of new rules set to invade the post- trade space. It is not just about dealing with the ramifications of the European Market Infrastructure Regulation (EMIR), but also Dodd-Frank, the MiFID Review and the Market Abuse Directive (MAD). Not to mention the Financial Transaction Tax, Basel III, risk data aggregation and growing financial crime requirements
Given the magnitude and sheer number of
the regulations, it is no surprise that deadlines have slipped and will continue to do so. However, despite all the revisions, the main thrust of greater transparency, better risk management and the standardisation of OTC trades contracts pushed through centralised clearing and on to exchange- like venues, will not change. Also, as of 15th
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Getting prepared Although there are many unanswered questions left, firms need to think carefully about the totality of implications from these regulations. Questions should focus on the operational issues, the business case, potential fines for not complying and last, but certainly not least, the budget available to meet these various new requirements. One of the greatest challenges for the buyside
is to differentiate between the various pieces of regulation. For example, Dodd-Frank and EMIR may look similar but there are key differences in the shape and form of margins for non-cleared trades, the data reported to trade repositories, account segregation requirements and the approach to third countries. The products subject to a clearing obligation and/or bilateral collateralisation requirements also differ. Despite this, there are enough common threads
from an operational viewpoint. These include the focus on collateral management and margining, tighter risk management and greater information disclosure. The things that are perhaps the hardest, in terms of the amount of effort required, will be dealings with the customer and how to classify them. Other challenges include business continuity planning, the arrangements required to prove safety and security when dealing with data
Best Execution | Spring 2013
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