Regulation and technology predictions for 2019

Industry experts give us their predictions for the New Year, focusing on regulatory and technology developments.

By Jonathan Watkins

Get ready for SDR, CSDR and SFTR

Tony Freeman, executive director, government & industry relations, DTCC

With most Brexit preparations out of the way, the market will focus on the Settlement Discipline Regime (SDR) component of the Central Securities Depositories Regulation (CSDR) due to enter into force in 2020. It will become increasingly clear how complex and expensive the new buy-in and failed trade penalties will be. As such, industry collaboration, across the buy-side and sell-side, will be essential for an orderly roll-out.

Other areas of regulatory focus during 2019 and into 2020 will be centred on the Securities Financing Transactions Regulation (SFTR) and phases four and five of the uncleared margin rules. Both are new regulations which will drive new technology and operational processes across the buy-side and sell-side and so preparations will need to begin in earnest early next year.

Lastly, I anticipate that mainstream institutional investors will continue to shun cryptocurrencies but projects such as the Swedish central bank’s e-Krona initiative will spur custodian banks to launch crypto asset capabilities.


From regulatory closure to new business plans

Gary Tenkman, president & managing director, Ultimus Fund Solutions

We believe that 2019 will be a year of regulatory closure. Closure, meaning that many open and ongoing actions driven by our governments and regula-tors will be finalised; firms and funds will have adopted their updated policies, procedures, and structural changes; and we all move forward in a slightly altered and somewhat more complex world.

By the end of 2019, mutual fund modernisation will have fully taken effect for all large AUM fund families (>$1 billion) and required procedures will have been adopted. Formal filings of Form N-PORT will commence for large funds in March, with the remaining fund families completing their filings exactly one year later in 2020. Likewise, large funds will have implemented the newly required liquidity management procedures by December 2019, with smaller funds following suit six months later in mid-2020. We also think 2019 could include clarity from the SEC on a Fiduciary Rule, potentially leading to resolution on one of the industry’s biggest question marks. Lastly, of particular concern to global managers or advisers with European affiliates, will be the final chapter to the Brexit saga. By this time in 2019, we expect to have a far better picture of what an EU without Britain will look like.

With these changes behind us and a clearer regulatory landscape ahead, we expect more resources can be put towards new business plans to expand and invest in growth, and we are excited about what opportunity that holds for the industry.

Technology to separate the best from the best

Teresa Parker, CEO & president of EMEA, Northern Trust

Emerging technologies are transforming custodians’ and their clients’ business models. We believe that the intelligent use of next generation technology, deployed alongside a firm’s existing infrastructure, is what will set one custodian apart from another. Through 2019, we will continue to see an evolution of successful business models based on clients’ and financial sustainability. In the digital age, strategically-focused firms will deploy best-of-breed data services to generate real efficiencies and improved decision making. Digital technologies will enable a greater richness, depth, and accessibility of data than has ever been possible before. For tomorrow’s leading institutions, they will even underpin business model transformations that will take the industry to a new level.