It’s becoming clear that as global markets have become more tightly connected, so should the rules-making processes. We need an international harmonization of regulations and standards for everything from proxy voting to OTC derivatives. Of course, this is easier said than done.
Much has been made of the regulatory arbitrage that is looming if the US and European regulators launch reforms in vastly different time frames. A Sifma panel on the OTC market last week underscored the need for the industry to deal with this issue. But international harmonization is proving “quite a challenge,” said Don Thompson, managing director and associate general counsel at JPMorgan Chase & Co., and moderator for the panel. “There’s the very real possibility of different sets of rules in Europe and non-US jurisdictions,” Thompson said. He added that unfortunately the disharmony starts at home with the CFTC and SEC regulators crafting different sets of regulations. All of which leads to competitive disadvantages for US firms.
But all is not lost. Others on my wavelength are also seeking harmony.
A case in point is the CorpActions 2011 event in London last week. The A-Team Group reported that a panel at the conference acknowledged that there is no global effort to harmonize standards governing proxy voting. Panel member Justin Chapman, senior vice president, global head of industry management, operations and technology at Northern Trust, was urging that the national initiatives underway start an international effort to synchronize their rules-making strategies. This could turn out to be a significant first step as Chapman represents the securities community on the UK board of Swift and is co-chairman of the Swift (UK) Ltd. Securities Product User Group.
On another front, the global effort to establish a legal entity identifier (LEI) system could serve as a model for harmonization.
There is a distinctly international flavor behind the LEI coalition of financial services firms, trade associations and the Global Financial Markets Association, a group that includes Sifma. The coalition has recently recommended to regulators the organizations “best suited to operate” a global system for LEI.
The coalition is urging regulators use: the ISO 17442 standard as the authoritative LEI standard; the DTCC, Swift, and the DTCC’s subsidiary AVOX Ltd. as the core LEI utility partners for data collection, data maintenance, LEI assignment, and quality assurance; and Association of National Numbering Agencies (ANNA) for Federated Registration services. The LEI coalition will work with the international regulatory bodies on the next stages of global implementation and governance. The LEI effort has many steps to go before all of the moving parts are ready for prime time, but its progress is encouraging.
I had hopes that the wake of the Great Recession there would be a new way of thinking about global markets. That hasn’t quite happened but there are signs that a new harmony may yet come.
Need a Reprint?
Leave a Reply