Attended the annual markit customer conference in London today, titled Financial Markets Reform.
These are my notes.
- Large turnout, at least 500 if not more.
- Every seat with a keypad device for voting, 1,2,3,..9 for questions asked in realtime by the compere, very cool, audience participation always helps in engagement and staying focused.
- Four panels and a keynote by Rich Ricci, until very recently CEO of Barclays Corporate and Investment Bank
- First up opening remarks by Lance Uggla, CEO of markit, came over very well as engaging and personable
- Then first question for the vote from the compere (apologies did not catch the name), “Do firms expect more, less or the same OTC Derivative transactions compared to last year”, answered as 20%, 26%, 22% and 31% na. So statistically inconclusive, ask a question with four possible answers and get equal numbers for each.
- First panel on “Regulatory reform, implementation, new initiatives, international harmonisation and cumulative impact – where do we stand? One regulator, two lawyers and one banker.
- Good opposing views aired, making the panel interesting. Best line from one of the lawyers “that all the legal work created by new regulations meaning he could afford many new cars”. And that European regulation was moving in the direction of US, so first what is the product (Derivative?), then who is the customer (Exempt from clearing) and this will have a market changing impact; so for example will Warrants be classified as derivatives or not, the answer to which could stop this market existing. Also if Europe had “more heads on spikes, like the US” there would now be less press, public and political pressure to push through new punitive regulations like the Financial Transactions Tax, which by one firms impact analysis would wipe out most of the profits of the 42 banks covered in their analysis.
- Another question to the vote, “what is highest on radar currently” and of the five options, highest was CCP Clearing at 62% and then Trade reporting at 24%.
- Second panel on “improved efficiency – are shared services the answer”. Two dealers, one transaction services and one vendor.
- Dealers philosophy change in not wanting to own everything in-house, but less interested in outsourcing for marginal cost and service benefits, and more interested in using external shared services and utilities that offer operational efficiency gains. Generally no meaningful opposing views on the panel, so could not remain focus on the discussion.
- Third panel on “Optimising and managing collateral in the margin age”, one custodian, two banks, one vendor and one consultant. Good discussions, most memorable included, is there sufficient collateral available for margining, answer yes provided can get it from owners, velocity of collateral needs to increase, quad party segregation.
- Fourth panel on Benchmarks and Indices – restoring trust. Two regulators, one index provider, one accountant.
- First another question, do you believe Libor can regain trust? Yes 40%, No need a New benchmark 38%.
- Interesting points, Libor is the only currently regulated benchmark, EU is working on a proposal for benchmarks, IOSCO standards for benchmarks and indices, what is a an index and what is a benchmark, when financial derivatives exist on an index it is a benchmark, creating a benchmark may use data on actual transactions, committed quotes, expert judgement and on top of these need to exercise judgement in calculating.
- Keynote from Rich Ricci, who read from a written speech with few slides, common for the most senior executives and leaders, I guess because they have to have speech writers, need to be on message and under conflicting time pressure, either way great delivery and messages, covering Euro Crisis, Industry Capacity and Structure of IBanks, New Expectation on the Financial Sector and Technology & Innovation.
- Noteworthy Statistic, Barclays by March 2013 had Cleared $13 trillion of client trades. (Note in May 2012 it was $1 trillion and in Nov 2012 $5 trillion, so this is a stunning increase).
- Overall an excellent speech, motivational in many parts, a little too much a pitch for Barclays capabilities to be a great one.
- Closing remarks by Jeff Gooch, CEO MarkitSERV, including humorous recap of the panel sessions.
- Then off to the drinks and canapes to network.
- Excellent event.