DTCC Perspectives on COVID-19

… shave milliseconds from trades and exploring cutting-edge fintech innovations like distributed ledger technology and digital and tokenized securities …

Keisha Bell, DTCC Head of Diverse Talent Management

How will the coronavirus pandemic impact diversity and inclusion programs across the industry and at DTCC? Will a move to a more remote work environment improve or detract from D&I efforts or diversity hiring?

With diversity and inclusion (D&I) now a strategic priority for most businesses, I don’t think it will become deprioritized in a remote work environment, but it’s incumbent on leadership to maintain a strong focus on these issues. Organizations can do this by having open and honest conversations on the impact of the crisis on Black, Latinx and Hispanic people as part of a larger conversation on how structural disparities have put these communities at greater risk. The more an organization can demonstrate its commitment to racial equality and having an inclusive work environment, it will be in a stronger position to recruit and retain top diverse talent. In addition, remote work will enable firms to recruit from a wider universe as geographic boundaries become less important, creating new opportunities to source people of diverse backgrounds and experiences. This may be a silver lining from an otherwise devastating situation.

Chris Childs, Head of Repository & Derivatives Services, DTCC Chief Executive Officer & President, DTCC Deriv/SERV LLC

How will the coronavirus pandemic impact clients in EMEA going forward and what have we learned and heard since the pandemic began?

The pandemic has put many financial institutions under enormous pressures that they could never have anticipated, introducing new pain points that could negatively impact business results. On top of this, firms in EMEA face a good news, bad news situation as regulators have delayed implementation of a number of mandates, including the Securities Financing Transactions Regulation (SFTR), the Central Securities Depositories Regulation (CSDR) and Uncleared Margin Rules (UMR) phases 5 and 6, which all demand significant preparation. While many firms have expressed relief that they have extra time to prepare for these requirements, the compounding impact of each regulation is complicating their compliance strategies – all while readying for Libor transition and Brexit by the end of December 2020. As a result, we have been encouraging the industry, which is already grappling with intense cost-cutting pressure and tight operating margins, to take a holistic approach to their preparations by identifying overlaps and synergies in their regulatory compliance plans.

Nellie Dagdag, DTCC Managing Director, Asia Pacific, Head of Marketing & Communications and Regional Administrative Manager

How will the coronavirus pandemic impact clients in APAC and what have we learned and heard since the pandemic began?

APAC is a heterogenous region with diverse operational practices across markets. While firms in APAC are used to managing local market nuances, the pandemic has highlighted a striking contrast in the level of infrastructure development and automation adoption in the region. Markets that are highly automated and have broad access to the Internet have transitioned faster into the “new normal” compared to markets which are not. Emerging markets with solid domestic investor bases, like China and Japan, have also recovered faster because they are not as dependent on foreign investors who may adopt a wait-and-see approach. As business operations will become increasingly dependent on the availability of robust Internet infrastructure for employees working outside the office, we anticipate an increase in capital spending on purpose-built remote working and communications tools.

Andrew Gray, DTCC Group Chief Risk Officer

How will the coronavirus pandemic change the way the industry manages risk, and will it lead to a reshuffling of the top risk priorities?

The pandemic has reinforced the importance of being prepared for extreme events and the need to address risks collectively as an industry and fix problems systemically. While resilience has always been a priority, there’s an opportunity now to take a more data-driven, analytical approach to preparing for future disruptions and ensuring people, processes and technology are in place to support the effort. This concept of intelligent resilience starts with a shared mindset in which everyone in an organization thinks about what could happen that could interrupt the business, and then considers how to prevent it and what actions are required to resume operations as quickly and safely as possible. Technology and data analytics act as key enablers to creating a risk management framework that accounts for the complexity of an interconnected and global marketplace. The foundation is a data lake comprised of structured and unstructured data capable of capturing all aspects of risk. When organizations apply new technologies to this data, they are capable of operating much more effectively than they do when they are using more traditional risk management models and approaches.

Tim Keady, DTCC Chief Client Officer

How will the coronavirus pandemic impact the shift to automation in key post-trade processes?

Black-swan events like the pandemic tend to spur operational changes designed to build defenses and help markets better weather the next crisis. Look at how firms overhauled their business continuity plans and dispersed critical functions across multiple sites in the wake of 9/11. Today, the pandemic has spurred a massive shift to work-from-home arrangements and also caused a contraction in global economic activity. In response, firms are seeking ways to streamline and simplify previously manual procedures so they can be performed remotely and to reduce operating costs to weather the downturn. Automation can help them meet both objectives. Certain activities are ripe for automation, so I expect we’ll see growing uptake of automation solutions for margin processing, collateral matching, exception management and SSI generation.

Jennifer Peve, DTCC Managing Director, Business Innovation

How will the coronavirus pandemic affect the development and adoption of new technologies?

The pandemic underscored the importance of digitization and reinforced that digital transformation of post-trade infrastructure has the potential to reduce risk and costs, enhance efficiency, and increase safety and stability of the marketplace. Particularly since the market volatility in March, we’ve seen the benefits of a more automated digitized ecosystem, as well as the need for further dematerialization regarding physical securities processing.

Murray Pozmanter, DTCC Head of Clearing Agency Services and Global Business Operation

How will the coronavirus pandemic impact post-trade process modernization efforts?

The pandemic has highlighted the weakest, most archaic link in the post-trade lifecycle – processing physical securities. There has been a long-standing campaign to achieve full dematerialization in the U.S. financial markets and to finally transition away from paper certificates to electronic records. In fact, those outside of the immediate industry might not realize that while firms today are investing hundreds of millions of dollars into modernizing processing systems, enhancing electronic trading technology to shave milliseconds from trades and exploring cutting-edge fintech innovations like distributed ledger technology and digital and tokenized securities, that something as unwieldy and cumbersome as physical securities – and the processes to support them – still exist.

The pandemic has pushed the industry to an inflection point, highlighting the need to move forward to full dematerialization. The complete dematerialization of physical securities will contribute to a more cost-effective, efficient, transparent, secure, competitive – and above all, resilient – marketplace for all. We look forward to working with our industry colleagues to advance this in the coming months.

Ali Wolpert, DTCC Managing Director, Government Relations

How will the coronavirus pandemic impact the global regulatory environment?

The pandemic has created tremendous challenges for policymakers globally. Governments continue to focus on responding to the immediate and longer-term health, economic, and socioeconomic challenges while debating whether and how to provide ongoing economic relief. Potential innovative approaches – such as Central Bank Digital Currencies (CBDC) – are gaining interest, and the concept of “digital dollars” has emerged as a potential means for distribution of future government relief funds. At the same time, policymakers are placing greater attention on privacy and cybersecurity issues as many firms consider shifting to working remotely on a more permanent basis. I expect the legislative and regulatory environment to remain highly dynamic in the coming years.

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About DTCC

With over 45 years of experience, DTCC is the premier post-trade market infrastructure for the global financial services industry. From operating facilities, data centers and offices in 15 countries, DTCC, through its subsidiaries, automates, centralizes and standardizes the processing of financial transactions, mitigating risk, increasing transparency and driving efficiency for thousands of broker/dealers, custodian banks and asset managers. Industry owned and governed, the firm simplifies the complexities of clearing, settlement, asset servicing, data management, data reporting and information services across asset classes, bringing increased security and soundness to financial markets. In 2019, DTCC’s subsidiaries processed securities transactions valued at more than U.S. $2.15 quadrillion. Its depository provides custody and asset servicing for securities issues from 170 countries and territories valued at U.S. $63.0 trillion. DTCC’s Global Trade Repository service, through locally registered, licensed, or approved trade repositories, processes over 14 billion messages annually. To learn more, please visit us at www.dtcc.com or connect with us on LinkedIn, Twitter, YouTube and Facebook.