Paul Walsh- What is the biggest regulatory challenge that you are seeing within the industry at the moment?
Sean Tuffy- Our business is primarily asset servicing so from our asset manger clients, MiFID II is the biggest event that is happening.
Then on a global basis, the SEC (Securities Exchange Commission) is taking steps to modernise the regulatory framework for asset managers.
These are indirect issues because most of the regulations are more buy-side focused because if you look at the pattern post-crisis, the initial regulation e.g. Basel, Dodd-Frank were all sell-side focused so the next wave is aimed at buy-side and asset managers.
For asset managers, once we are at the other side of MiFID it should be slowing down in terms of regulatory environment.
PW-What is the key focus point for our industry at the moment?
ST- In a macro sense away from regulations, for the financial services industry in Europe, it starts and ends with Brexit.
It is a known unknown, everyone knows Brexit but nobody knows what that means in the short-medium term so this is the biggest issue for everyone in the industry, from banks to asset managers to broker dealers.
People are looking at London and are thinking about what its relationship with Europe will be like after the breakup.
PW-Will we see volatility once Brexit takes shape?
ST-Where things get choppy is when it comes to inflection points, so article 50 is the next inflection point when we see markets react and then they will calm back down again.
It wouldn’t surprise me if we would see increased volatility once article 50 is triggered because the clock will have started but no-one will know when it’s going to end.
I think there will be a lot of speculation about how transparent the negotiations are, so what I think the market would like to see is the government outlining a Brexit manifesto showing goals which would give a slight amount of certainty.
PW-There has been a lot of talk about changing custody models and how custodians are looking to possibly move out of certain markets, what are your thoughts on this?
ST-Custodians are constantly evaluating their network so it is a constant risk assessment, custodians look at exists for a number of reasons.
When you provide sub-custody to your clients its based on what clients are demanding so if the client doesn’t want to invest in market X then custodians will – over time – aim to tighten up the market.
I don’t think there is a great spike in market changes and exits at the moment so they won’t exit en-masse.
PW-Is there a future for sub-custodians?
ST-Within Europe when T2S is bedded down you will see mergers of regional custodians and experts but they won’t be disintermediated because they offer asset skills.
Sub-custodians will face a challenge with T2S in Europe but they still provide local expertise which is critically important.
PW-How have the themes at previous Sibos’ developed?
ST-Based on last year, it is probably more forward-thinking but – for example – last year everyone was talking about blockchain but more realistically.
At this Sibos, the emphasis is on blockchain but no longer that this is a magic bullet more of an interesting piece of technology.
This is healthy for the industry to start talking about blockchain in more realistic settings so year-on-year this is probably the biggest change.
The other main emphasis is on cyber which has become a dominant theme and definitely one we will see in Sibos 2017 in Toronto.