Sibos 2010 Day Four - ‘Cost reduction and risk monitoring is key’

29 October 2010

As Sibos lumbers into its fourth day, signs of flagging are showing. Premature greyness has affected certain delegates at the conference centre while other attendees now resemble suit-wearing zombies, only capable of mumbling to themselves and shuffling between the stands.

The amount of sessions, meetings and networking events has certainly been relentless over the course of the last few days. However, business showed little sign of letting up on the morning of the final full day.

Again the three key themes of regulation, rebuilding trust and recovery were very much in evidence. A panel discussed the business risks surrounding corporate action - such as a rights issue or cash dividend - and how this risk can be mitigated to reduce costs.

Neil Daswani, regional head of North Asia, transaction banking at Standard Chartered Bank, opened the talk by stating that when he considered the issue, “the first thought was a four letter word - XBRL”.

He questioned whether this risk reporting solution could be a “panacea to cure all ills” - Tertius Vermeulen, chief operating officer and managing director of custodial services at Computershare, said that it may be the answer in certain territories such as the US and Japan - but emphasised the importance of risk controls being tailored for each market place.

The panel agreed that action to address the issue should be taken sooner rather than later as the costs of sourcing and scrubbing data to repair errors continues to spiral.

David Kane, managing director at JPMorgan, said timing and interpretation were two major areas of risk associated with corporate actions. If investors do not receive the appropriate information to instruct an execution or if a trade is made too late, then this can be the “difference between success and failure”, he explained.

Vermeulen called for a principal of reducing up to 80 per cent of risk surrounding corporate actions. He suggested that this should be an industry standard for the community.

Elsewhere in the conference centre dialogue was ongoing - Sibos may host a variety of talks in the halls, but the main body of the event is made up of 200 firms exhibiting their products and services.

For a first-timer at the conference the size of the stands and the various attractions which companies use to tempt delegates can be bewildering. Massages, vuvuzelas and the ubiquitous USB stick were among many of the free gifts I saw while speaking to Sibos exhibitors.

However, despite the array of freebies, the main reason for visiting the stands is for business - and, if the busyness of the exhibitors I saw was anything to go, business appeared to be booming. The stands were full of discussion and meetings, many of which appeared to mirror the key themes being talked about in the bigger conference events.

Richard Childes, senior consultant at Openlink, reiterated the notion of market fragmentation and how it had been a key issue in the discussions he had had over the course of the last three days for the firm.

Phillippe Chambadal, chief executive officer at Smartstream, also echoed some of the views aired earlier in the week.

“Large banks are focused on cost reduction and how to manage and monitor their risk. Those firms that aren't being proactive in this regard are being and will increasingly be forced to look at their post trade infrastructures on the insistence of regulators. We are this already in the demands by the UK FSA and Hong Kong MA for intra-day reporting,” he said.

He suggested that banks are currently looking to locate their data within an internal utility, which would become a single space for a financial institution to store such information.

This is a good original risk control as it helps banks maintain a clear view of their cash and improves trade efficiency. It ensures data used to inform trades is clean during the lifetime of a trade cycle and negates risk by improving cash management during volatile times, the CEO explained.

He used Smartstream’s DClear Reference Data Management Utility, a centralised processing product which the firm launched last year, as an example of a type of solution which can help enhance risk controls as well as reducing costs surrounding transactions.

Elsewhere, Phil Cantor, senior product manager at Smartstream, gave a lively discussion on cash management, which was the final talk I attended. He suggested how management of capital has become increasingly important for banks in the wake of the financial crisis and was a suitable topic on which to draw the curtain on my first Sibos event.

By Jim Ottewill

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