Sydney was a fantastic location choice for Sibos 2018. Though I should warn you that I write these first lines in the early stages of my 27-hour flight back to London, so prepare for my sentiment towards this year’s conference to change slightly as tiredness kicks in.
In fact, within these takeaways you will find some criticisms amid the praise, because as Sibos has established itself as one of the most forward-thinking and agenda-setting banking and securities services conferences around, it ultimately has to meet the high standards it sets itself with each passing year.
To explain the headline of this piece, I felt that discussions at the event took two forms: Firstly, how-it-works, where new collateral, data and distributed ledger technology initiatives were discussed by those involved with them. This was a refreshing change as we moved on from the theory of new technologies to tangible real use cases and what they expect to bring. The explanation of the Australian Securities Exchange’s overhaul of its post-trade systems through Digital Asset’s blockchain offering from both parties involved was a prime example of this, with great insight into the benefits around data, settlement and collateral.
Secondly, the fireworks, where panellists from FinTechs, start-ups and crypto companies were welcomed onto panels with incumbents, often pressing them into conversations and debates which they would not have had when too many likeminded people sit on a stage together. From this we got conversations like ‘do we really need CSDs’ and ‘if you don’t do something around data you will cease to exist’.
The takeaways from this conference often shape discussions for the foreseeable future, so here are Global Custodian’s main talking points from Sibos 2018:
One of the most exciting topics at this year’s event, was the tokenising of existing and new assets, along with collateral, with securities services firms across the board seemingly accepting of this future reality. Here’s a short list of some of the exciting potential new asset classes mentioned through tokenisation: movies, royalty rights, art collections, real estate, Beyoncé tickets and even horses. Tokenising these current non-tradable assets are what the likes of SIX Securities Services and Standard Chartered have discussed with Global Custodian recently, along with a range of start-ups. Tokenisation would allow any of these assets to be included in a portfolio, without buying the asset in its entirety. For existing asset classes, it could allow the speeding-up of transaction times, improved transparency and reduced costs. Outside of the obvious new avenues for capital generation, Broadridge explained to Global Custodian that significant operational efficiencies in markets across the trading and post-trade lifecycle of the securities industry await, along with increased portfolio liquidity and velocity of alternative assets via improvements in areas such as collateral management. Tokenisation, it’s the future, and it’s really, really interesting.
Disruption has been replaced by harmony
Remember the time when we were talking about banks in the securities services space being disrupted? Well it didn’t last long. Now the focus is really on partnerships between FinTechs and the incumbents, with the latter increasingly embracing their new counterparts and working with them to rollout new technologies. While it’s still difficult to work with major players – given their legacy technology and how difficult it is to even get through the front door – there seems to be a future for both, even if Sibos did put them on different floors of the exhibition hall.
Fireworks inside and outside of the conference
SWIFT put on a wonderful firework display at the end of the event, and I have three or four blurred and distorted photos to prove it if you’d like to see. But more of interest to you will be the fireworks that took place within the conference.
To get the most out of a panel discussion, the perfect recipe is to have individuals who are unafraid to challenge the status quo, and lay down some #realtalk, along with seasoned experts from some of the largest institutions. This creates a much more fiery conversation and brings out the best in everyone. When this happens, we get more real and honest answers because often the publicly delivered corporate message does not stand up against the innovators and disruptors who call them out for some of their archaic ways.
This made for great viewing, and equally as interesting stories, which you can find on the Global Custodian homepage.
End of the great re-regulation
One panel on regulation! At a four-day financial services conference, can you believe that? This was a significant change from previous years where regulatory discussions have dominated the agenda. What this also proves is that Global Custodian absolutely nailed its front cover for our Fall edition which appeared at the event where we claimed we’re at a wonderful point in time right now: the biggest regulation changes are behind us and the ones on the horizon are far enough away not to worry too much. This is allowing financial services firms on the buy- and sell-side to concentrate on innovation and business decisions as opposed to arduous regulations like the colossal MiFID II rules which came into force at the start of the year. Given the technology vs regulatory panel count at Sibos, this seems to be the case. Enjoy this downtime though as next year there could be much more of a focus on CSDR, SFTR and future cyber-crime, ESG and other incoming regulations.
Collateral mobility is getting fixed
We would like to wholeheartedly apologise for the years of stories on a potential collateral shortfall. In hindsight that wasn’t so interesting, and the lack of high-quality liquid assets never really occurred. What has followed though, are substantial costs and complexities in collateral mobility, something the likes of Deutsche Borse, Clearstream and a group of banks are trying to fix. HQLAx is a securities lending platform using R3’s blockchain technology, where the use of tokens allows collateral to stay fixed with the legal entitlement moving and being held for safekeeping by a custodian. Set to be ready for use by clients either at the end of this year or beginning of next, participants believe it will save billions of dollars in costs associated with collateral and will expand in the coming years. Another example of things actually happening with blockchain technology.
A backwards step for diversity at Sibos?
Of the securities services panels I attended I was surprised to see such a lack of diversity with regards to speakers, at a conference which in previous years has had such a focus on the topic. I have previously applauded SWIFT for being forward-thinking, and including discussions around diversity but there has to be more of an effort when it comes to panel discussions. There was often one woman within a session, but never did I see even a 50/50 split. In fact, the only all-female line-up was in the sole diversity discussion. That’s not the only issue these professionals are able to discuss. There was a lack of different ethnic backgrounds in these discussions, which did not seem representative of the attendees of the event. Why is it that people of an Asian background only seem to be invited to discuss Asian issues such as India and China, and not wider industry matters? Data, crypto, FinTech, collateral and all the other major securities services talking points are not restricted to Europe. This was my takeaway, with no agenda of targeting the conference or organisers and I can’t speak for other streams such as payments or Innotribe, but it just seems more of a shift towards an equal gender split should not be difficult considering the growing number of women in senior securities services roles across the industry.
Data challenges for post-trade providers and their clients
As you would expect, data came up on almost every panel, all with undertones of the challenges both the buy- and sell-side are facing. For custodians, they are sitting on mountains of potentially valuable data, but rules and restrictions mean they are having to be careful in how they package it up and provide it to clients. Meanwhile, asset managers have been slow to incorporate big data into their day-to-day operations, despite the cutting-edge tools on offer to deliver. Essentially the data is out there and panellists agreed it could help steady the shift towards passive strategies, but delivering it and monetising it is a challenge for post-trade providers.
Did securities get the cold shoulder?
SWIFT may disagree, but in my opinion, the Sibos securities stream over the four days was stripped back a bit this year in terms of presence on the agenda, with broader financial technology and data discussions seemingly taking over some of its slots. Perhaps that’s a sign of the importance of technology discussions at present and the declining prominence of regulations and a waning interest in collaboration and business model discussions.
ISSA timed its reports to perfection
Whoever is in charge of PR for the International Securities Services Association (ISSA), give yourself a pat on the back. ISSA reports were referenced throughout the conference, primarily the takeaways from the crypto assets report and its recommendations for cyber security risk management in securities services. I can’t say I’ve read them cover-to-cover but it’s good to see an association exploring the most current and relevant topics.
There were some great speakers during the four days, but some really stood out from the crowd, namely Joseph Lubin, CEO of Consensys, Blythe Masters, CEO of Digital Asset, Justin Chapman, global head of market advocacy & innovation research at Northern Trust, Fiona Gallagher, head of securities services at Deutsche Bank, and Tim Lind, managing director, DTCC Data Services. For me, they were the pick of the bunch.
Sydney is a long, long trip.
Tiredness really kicked in after that last point. Thanks for reading.