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The Securities Industry and Financial Markets Association’s (SIFMA’s) Asset
Management Group (AMG) is part of a letter of agreement that was signed by the
senior managers of 17 major derivatives dealers (Major Dealers). The agreement serves as an update to the
Federal Reserve Bank of New York and other regulators and outlines goals,
strategies and major benchmarks toward the continued improvement and
streamlining of operational efficiency within the credit and equities
derivatives markets.
This agreement is a continuation of the work
of the Operations Management Group (OMG) that is tasked with leading
fundamental change in front-to-back processes across Over-the-Counter (OTC)
derivatives. The Federal Reserve Bank
of New York has taken the lead in improving operations and efficiency in the
derivatives market which is important to its overall scaling up and growth.
“SIFMA and AMG are committed to advancing
true operational scalability by working hand-in-hand with buy-side member firms
to ensure that they successfully meet the necessary and evolving operational
requirements,” said Joe Sack, SIFMA managing director. Within OMG, Major Dealers work closely with the
main trade organizations representing both buy-side and sell-side organizations,
SIFMA’s Asset Management Group, the International Swaps and Derivatives
Association (ISDA) and the Managed Funds Association (MFA).
Some of the following key goals are outlined
in the letter:
- Consistent use of electronic confirmation platforms for
electronically eligible trades
- By May 2008, SIFMA, ISDA and MFA will deliver a market
implementation plan on all relevant goals
- OMG’s goal is a marketplace where majority of trades are matched on
their trade date. In July,
submission matching accuracy targets will be met by Major Dealers and
buy-side institutions that are part of the OMG
- Sets a 2008 timeline for electronic novations which are also known
as assignments and are essentially secondary market trades. New novations clients will have 30 days
in order to make trades electronically.
The letter to the Fed is significant as it
marks the commitment of SIFMA, ISDA and MFA to educate, not only their members,
but the wider marketplace about the 2008 goals and how they impact various
market participants. A major requirement
on asset management firms is investment in technologies that will help the buy-side
automate the allocations process, thereby helping the industry achieve the
matching commitments described in the letter to the Fed. “SIFMA will add value to the process by
maintaining dialogue, flow of information and facilitating industry
partnerships that will create technology solutions,” says SIFMA’s Joe
Sack.
Additionally, SIFMA is poised to guide market participants through the change process and ensure that custodians and vendors are included in ongoing discussions. Specifically, SIFMA will work through its Asset Management Group consisting of senior executives and its Asset Managers Forum consisting of trade processing professionals, enabling it to help the buy side meet its commitments.
