February 3-5, 2016 // Montage Laguna Beach // Laguna Beach, CA
Highlights from the 2016 FIA/SIFMA Forum
From February 3-5, 2016, FIA and SIFMA Asset Management Group (AMG) hosted over 300 participants at the FIA/SIFMA Asset Management Derivatives Forum.
The conference kicked off on February 3 with opening remarks from Tim Cameron, managing director and head of SIFMA Asset Managers Group. Cameron commented that this is a critical time for the asset management industry because of the large number of regulatory changes that must be implemented at a rapid pace across multiple jurisdictions. It is essential, he said, for regulators to “strike the right balance” in achieving necessary reforms without causing excessive harm to either the functioning of markets or the ability of asset managers to serve the best interests of their investors.
The opening panel, which featured senior executives from leading asset management firms with Walt Lukken, president and CEO of FIA, acting as moderator, discussed the impact of new regulations on the cost of using derivatives. The speakers commented that regulators want clearing of derivatives, yet ironically requirements designed to increase the amount of capital held by banks have the effect of discouraging the use of clearing. As one executive commented, “We want to clear. Regulators want us to clear. But the capital rules aren’t friendly to clearing.”
The panel also discussed the importance of international consistency in the regulation of clearing and the ongoing discussions between US and EU regulators regarding differences in clearinghouse regulation. The speakers stressed the importance of reaching agreement on “equivalence” and warned that a failure to reach agreement on this issue would fracture liquidity and further drive up the costs of using derivatives.
Day 1 wrapped up with the Buy Side / Sell Side Showdown where the Buy Side panelists won 90-4 in this ‘Family Feud’ style session.
February 4 started with a Fun Run at sunrise and then shifted into a morning of sessions covering the changing FCM model, position limits, swap execution developments and more.
Asset managers are facing a new degree of complexity in their relationships with clearing brokers, a panel of industry executives said during a panel discussion on Thursday morning.
As the asset managers explained, clearing firms are taking different approaches to solving capital and leverage ratio issues, creating more variation in the clearing services they provide. That leads to more complexity for clients, particularly for asset managers that have funds in more than one jurisdiction. As one panelist commented, everyone wants to act globally, but instead clearing relationships have to be managed regionally.
Another Thursday morning session delved into the clearinghouse perspective. As the industry wrestles with the increased cost of clearing, attention is turning to the potential for innovative responses from the clearinghouses that sit at the heart of the clearing ecosystem. Senior executives from several leading clearinghouses discussed their efforts to develop new solutions, including direct clearing models and compression services. But the executives cautioned that clearinghouses are not "a breeding ground" for innovation. Their core function after all is to manage risk, they explained. In addition, clearinghouses are subject to stringent regulation, and any new idea will need a long lead-time to get regulatory approval.
On final day of the FIA/SIFMA Asset Management Derivatives Forum, attendees explored disruptive technology, like block chain, and how the implications for more efficient clearing and settlement. Other sessions covered diminishing liquidity, the global regulatory landscape and repo clearing.
FIA and SIFMA AMG are planning to convene next in New York on April 7 for a half day event, “A New Era of Automated Derivatives Trading: A Business and Legal Perspective.” Stay tuned for more details.