By Prashant Kumar - Senior Vice President of Business Development
Data is in the limelight. The challenge is not just about clean data around settlements and clearing, to resolve out trades. There's ever increasing regulatory reporting too, and greater demands for insightful data for all areas of the business. Reports for regulators have to be immaculate. The scrutiny is high, the consequences are serious.
The European Union's Capital Requirements Regulation - CRR defined under Regulation No 575/2013 - defines the requirements relating to prudent valuation (PRUVAL) adjustments of banks' fair-valued positions. The purpose of the regulation is to mandate banks to set capital aside for the "uncertainty" of valuations that are inherent in the mark-to-market and mark-to-model approaches used by trading institutions.
The regulation became law in Q1, 2016. Banks are now expected to comply with the Regulatory Technical Standard (RTS) that the EBA published on the back of the regulation. But the bank of England thinks the industry is not up to standard yet.
As the EMIR mandatory clearing of interest rate swaps kicks in for Europe's biggest firms), Neill Vanlint of , GoldenSource and Nick Newport of InteDelta explore the operational challenges facing CCPs and argue that an industrial revolution is called for to prevent operational risk seeping into the system.
The CCP landscape is at an inflection point. Although it's evolved hugely over the six short years since its establishment, the industry will see a major shift in requirements over the next 6-18 months. EMIR's mandatory clearing of interest rate swaps is the latest of many deadlines coming thick and fast after a series of delays, and as a result, volumes are set to increase dramatically in the coming months. That will bring challenge, but also opportunity for those who are well-positioned to take advantage of it. What has, to date, been something of a cottage industry is set for an industrial revolution.
When financial data practitioners get together, the conversation ultimately turns to the struggle for power in a fight against the rising cost of data. This held true during a recent Financial Information Services Association event in Sydney where practitioners voiced concerns that the industry continues to lose control over the shifting costs within their data contracts.
Data increasingly underpins critical functions for financial services companies that are looking for efficient growth amid increased regulatory demands. The same data that previously could be accessed for free is now appearing in contracts as a cost, and practitioners say they’re losing more control of contracts as vendors squeeze out any freebies.
I was talking to a CIO of a high yielding Hedge Fund recently. He described a need in his org around classical security master features along with reporting and position aggregating needs which were "data warehouseish" in nature. I consider him to be a tech guru and he has a strong track record of delivering on time. He queried whether he can just build this himself?
I was able to tell him with confidence that even with the right balance of domain IP and development resources, it will take 2-3 years to get a first stable cut out. Even longer if it's meant to be truly multi-domain (i.e. Products, positions, customers, counterparties with the hardest part being modeling the links between these). You simply can't just throw bodies at this.
He asked how I arrived at this number. Well, we've been doing this for 30 years. Here's the thought process I described:
The industry hit a pivotal moment following the financial crisis: It quickly realized there was a greater need for regulation and control of assets.
These combined to spawn an explosion of reporting mandates and the need to respond to new opportunities faster and more cost efficiently, but with a granular view of exposure and risk.
As global FX volumes rise, Dev Bhudia of GoldenSource explains why certain asset managers and hedge funds are seeking alternative ways to manage pricing risk
From the EU extending sanctions on Russia to China devaluing the Yuan, there is no shortage of events affecting a fund manager’s investment strategy. But in the midst of such volatility, the priority for any fund manager remains the same: deliver absolute returns in an increasingly competitive, intricate and highly regulated market.
04 June 2015
Five years on from FATCA's inception, Dev Bhudia of GoldenSource argues that in order to realise new revenue streams from customer data, financial institutions can no longer afford to view regulations in isolation.
They say birthdays are the perfect time to reflect and for many banks, the fifth anniversary of FATCA is no exception. It seems hard to fathom now, but when it first came into force FATCA was something of a "known unknown". If successful, banks could bet their bottom dollar other countries would follow with a similar law to crackdown on tax avoidance. However in the beginning many were left scratching their heads, wondering how many clients domiciled outside the U.S. had reporting obligations.