In a Q&A with FTF News, the chair of ISITC provides forecasts for corporate actions, derivatives and margin and collateral management, reconciliation and reporting, reference data and standards, and settlements.
(Editor’s note: This tumultuous year is winding down but there’s every reason to think that securities operations will continue to make leaps and bounds next year especially when it comes to cutting-edge IT. Erica Borghi (née Choinski), chair of the International Securities Association for Institutional Trade Communication (ISITC), and vice president of Fintech Risk at Brown Brothers Harriman & Co., affirms this and other advances coming for the many branches of securities operations. FTF News reached out to Borghi to get a sense for what ISITC foresees for 2018, and she agreed to do another Q&A with us (see below). She spoke to us earlier this year. The questions in this Q&A refer to the efforts of major working groups of ISITC, which brings together broker/dealers, custodians, investment managers, vendors/utilities and other industry professionals to develop standards to improve efficiencies in trade processing and related communications. In addition to holding the top post at ISITC, Borghi is a vice president and the head of FinTech Risk at Brown Brothers Harriman & Co. (BBH) where she oversees the development of risk mitigation strategies across various aspects of the business, including market practice changes, compliance updates, new client onboarding, and know your customer (KYC) processes, officials say.)
Q: General comments:
A: ISITC foresees the financial services industry continuing to focus on technology solutions in 2018.
Firms are still implementing operational improvements and investigating use cases for DLT [distributed ledger technology], artificial intelligence, and machine learning.
Operational efficiency and secure communication methods remain critical aspects of our businesses, particularly as bad actors continue to find more sophisticated methods for fraudulent activities.
Q: Corporate Actions: In your opinion, what is the biggest corporate actions challenge that industry participants will face in 2018?
A: The challenges that the Corporate Actions Working Group foresees in 2018 are centered on a few key topics.
Custodians and investment managers are seeing an increasing number of 5 Day Tender events — which require quick announcement and decision turnarounds — as well an increase in the number of corporate actions where there are additional tax reporting responsibilities.
There is also a need to identify an improved workflow to the U.S. Partial Call Process, which will enable the called quantities to be sent quicker to the underlying shareholder. These areas all carry risk and we are working to find efficiencies while reducing potential exposure.
Q: Derivatives and Margin & Collateral Management: What should the industry look forward to in 2018 as far as messaging standards governing collateral and margining?
A: The ISITC Derivatives and Margin & Collateral working groups are collaborating with FIA [Futures Industry Association] and SIFMA [Securities Industry and Financial Markets Association] AMG [asset management group] members to standardize the ETD [exchange traded derivatives] and OTC [over-the-counter] cleared margin call communication workflow between FCMs [futures commission merchants] and their clients.
The industry has made strides in recent years to standardize collateral messaging and workflows for uncleared swaps.
In an effort to streamline all collateralized product workflows, it is expected that STP will expand to repos, TBAs, [to be announced] and ETD and OTC Cleared products in 2018.
Q: Reconciliation & Reporting: For next year, what should industry participants expect as far as ISITC’s top reconciliation efforts?
In 2018, the Reconciliation Working Group will bring to the forefront a myriad of disruptors that may change the shape of reconciliation functions within member firms.
We will enable member firms to participate in robust conversation and debate on a range of topics, including artificial intelligence, blockchain, and sourcing strategies.
Q: Reference Data & Standards: What will be some of the top reference data issues that ISITC will be addressing in 2018?
The Reference Data & Standards working group will continue to be active participants in the ongoing CPMI/IOSCO [Committee on Payments and Market Infrastructures /the International Organization of Securities Commission], ISO, and FSB [Financial Stability Board] efforts around reference identification of OTC instruments such as the OTC ISIN, UTI, and UPI.
Q: Settlements: What are the top concerns of the committee as it moves to advance the communication of settlement instructions and confirmation messages?
In 2018, the Settlements working group will look to collaborate with other ISITC working groups and forums to document and develop best practices to automate and standardize current manual processes such as collateral processing, SPO [special payment order] activity, and fax instructions.
In addition, we will continue to collaborate with other industry associations to track and vet Market/CSD [Central Securities Depository] Impacts to investment managers and global custodians.