SEC should drop personal info from CAT plan, SIFMA says | Report: Tech upgrade could save largest banks $400M a year | Bitcoin futures spike, trip circuit breakers
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December 14, 2017
SIFMA SmartBrief Operations & Technology
News on the capital markets for operations and technology professionals
Top Story
SEC should drop personal info from CAT plan, SIFMA says
SIFMA is supportive of a consolidated audit trail surveillance system but has urged the Securities and Exchange Commission to drop the collection and use of personally identifiable information. As the system is currently designed, it would hold a great deal of sensitive PII needed to accomplish the goals of CAT, to which approximately 3,000 people would have access, presenting a tempting target for hackers and no clear plan to secure, says SIFMA President and CEO Kenneth E. Bentsen, Jr. SIFMA suggests the SEC would be better served by collecting less initial data and requesting additional data as needed. Read SIFMA's testimony on CAT implementation and cybersecurity protocols.
InvestmentNews (tiered subscription model)/Bloomberg (12/12),  Markets Media (12/12),  WatersTechnology (subscription required) (12/13) 
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eBook: Top 5 Financial Services Trends of 2018
Download DMI's latest ebook, 5 Financial Services Trends to Watch in 2018, to discover the top trends the financial services industry needs to pay attention to in 2018.
Operations Update
Report: Tech upgrade could save largest banks $400M a year
If the top 12 banks improved their technology architecture, they could save up to $400 million a year and reduce the "derivatives-confirmation cycle from 28 to 7 days," according to a report from McKinsey & Co. The report notes that much of the savings could be achieved by "eliminating duplication, reducing programming time, and downsizing the infrastructure for applications and data centers."
Futures & Options World (subscription required) (12/11) 
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Bitcoin futures spike, trip circuit breakers
Contract prices shot up more than 20% hours after Cboe Global Markets opened trading of bitcoin futures, triggering circuit breakers that temporarily shut down trading to manage volatility. Dealers say they were handling bigger volumes than expected.
Bloomberg (free registration) (12/11),  Reuters (12/11),  The Guardian (London)/The Associated Press (12/10),  The Wall Street Journal (tiered subscription model) (12/11) 
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Technology Update
DTCC survey: Fintech, cyberrisk are risk sources
A survey by Depository Trust & Clearing Corp. finds 15% of respondents see financial technology as a "significant source of risk" to financial stability. Cyberrisk is cited as the leading source of risk by 36% of respondents.
Futures & Options World (subscription required) (12/11) 
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Machine learning in trading faces uphill battle
Quantitative Investment Management and Teza Capital Management, up 68% and more than 50% this year, respectively, have leveraged machine learning to become top-performing hedge funds, but struggles faced by The Voleon Group, up about 4.5% this year through October, show the strategy's difficulty. Finding an approach to machine learning that works with complex data presented by financial markets is challenging, experts say.
The Wall Street Journal (tiered subscription model) (12/11) 
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Blockchain changes commodity business
More commodity firms and traders, including BP, ABN AMRO, Mercuria Energy Group, Natixis and Trafigura, are adopting blockchain technology to increase efficiency, changing the way they do business. "Once you've established blockchain and it's working, you will see faster changes, because then the transformation of the value chain becomes an option," said Rabobank analyst Harry Smit.
Bloomberg (free registration) (12/14) 
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Regulatory and Legislative Update
Fed aims to improve transparency of bank stress tests
The Federal Reserve has proposed changing annual stress tests to provide banks more information on how their portfolios might fare during market shocks. "This enhanced transparency will bolster the credibility of our stress tests and help the public better evaluate the results," said Randal Quarles, vice chairman for supervision.
Reuters (12/7),  American Banker online (free content) (12/7),  Financial Times (tiered subscription model) (12/7) 
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Fed to debut 3 market benchmarks next year
The Federal Reserve has confirmed it will launch three market benchmarks to replace the US dollar London Interbank Offered Rate. The Secured Overnight Financing Rate, the Triparty General Collateral Rate and the Broad General Collateral Rate will launch during the second quarter.
Central Banking Publications (subscription required) (12/11) 
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Uncertainty persists regarding Basel III op-risk outcome
The Basel Committee on Banking Supervision's latest revisions to the Basel III capital framework have met doubts from bankers, who say the changes do not help them accurately reassess capital requirements and depend excessively on national regulators' calculations. The committee's impact study on the operational-risk framework suggests capital requirements will fall by 30% on average, but independent projections show a wide variety that depends on the bank, ranging from a decrease of 66% to an increase of 222%.
Risk (subscription required) (12/11) 
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SEC push for liquidity transparency challenges industry
Industry participants worry they will not be ready to implement the Securities and Exchange Commission's Rule 22e-4, which requires investment companies to assign assets to one of four liquidity buckets, by December 2018. "It comes down to data as the real pain point, in terms of figuring out the nitty-gritty details of what buckets what positions should be in," said Matt Grinnell of Fidessa.
Traders online (12/11) 
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Early Bird Rates Available for SIFMA's OPS 2018 Conference: May 7-10, Arizona
As the industry continues to evolve, today's innovation is presenting new ways for firms to understand and interact with their customers, businesses, and the capital markets. Join SIFMA for the 45th annual Operations Conference and Exhibition on May 7-10, 2018, to explore key developments in the Consolidated Audit Trail (CAT), Data Protection, Cybersecurity, Operational Risk Management, Regulatory Priorities, Emerging Technologies including Distributed Ledger Technology, and more!
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From Potential to Impact: How Fintech is Changing Operations
Developments in fintech are driving new efficiencies, enabling firms to streamline their operations, redefine their processes and transform the customer experience through innovation. According to PwC's 2017 Fintech Report, 82% of firms in the industry expect to increase fintech partnerships in the next three to five years to innovate and integrate emerging technology into a production system or process. A panel of experts at The Capital Markets Conference discussed the leaps in operational processes and what's next for blockchain, artificial intelligence and more.
SIFMA (11/20) 
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