In the first part of their podcast, Neil Vernon, CTO for Gresham Technologies, and Philip Flood, chief commercial officer at Inforalgo, focus on the ripple effects of market volatility upon operations and infrastructures.
Volatility in global financial markets whether it is induced by the COVID-19 pandemic or other jolts is shaking and rattling the infrastructures of securities operations at many banks and other financial services firms, say Neil Vernon, chief technology officer (CTO) at Gresham Technologies, and Philip Flood, chief commercial officer at Inforalgo, a Gresham company.
Vernon and Flood provided their insights into the ripple effects of volatility via an FTF Exchange podcast that will be presented in two parts. This is the first part of the podcast.
Since the onset of the global pandemic, there have been many days when markets were extremely volatile and caused a “knock-on effect to the amount of reportable data that needs to be submitted,” Flood says.
When the volatility and its aftermath are coupled the reporting demands of the Consolidated Audit Trail (CAT), the result is the need to capture huge amounts of data, Flood says.
In addition, firms need to stay on top of “existing regulations that have increased scope or new reportable fields or new products at firms or new firms that are in scope,” Flood says. “It makes the whole real-time regulation, reconciliation and exception management much harder especially obviously with working from home with limited infrastructure and obviously that lack of collaboration from colleagues.”
Overall, though, firms are finding that market volatility, whatever the cause, will expose weaknesses in infrastructures, says Vernon who has observed that Gresham’s customers have trade break rates of less than one percent.
“They deal with exceptions really well,” Vernon says. “The vast majority of trades get though the flow correctly and are reported correctly. But on these volatile market days where trade volumes go up by 50 percent, 60 percent, we see exception volumes just skyrocket.”
In fact, one of Gresham’s biggest customers “has 5,000 exceptions a day, on an average day. On March the 15th — that huge market volatility day — their exception rate went to half a million transactions that failed,” Vernon says. “So, it went from 5,000 breaks to half a million breaks. Of course, they can’t deal with that easily. It was a real problem the day after, picking up the pieces. It’s a problem for reconciliation. It’s a problem for reporting. It’s a problem across the business. … Actually, I’d say that any day with a significant market volatility, the infrastructures are not handling the massive increase in volumes.”
Listen to the podcast by clicking above.
The second part of this podcast will be available soon and will cover:
- Major regulatory reporting deadlines and trends for 2021;
- The major regulatory reporting trends impacted by the lockdown and remote staffing;
- How firms should firms set their priorities;
- Budgets for operations and compliance teams;
- And areas of overlap with Ops and Compliance teams.
You can also check out the latest webinar from Gresham:
Are you Ready for CAT Interfirm Linkage Reporting? Watch Here