12.23.2021

DTCC 2022 Outlook Commentary

     Mike Bodson, President and Chief Executive Officer

 

In 2022, we expect to see more asset classes evolve into digitized forms, which will create opportunities for firms like DTCC to support market transformation by creating the infrastructure to enable their safe and efficient processing. Market infrastructures are best placed to mitigate the operational and counterparty risks related to digital assets by establishing governance models and standardized post-trade processes, which will be critical to developing deep, liquid and efficient markets and promoting greater investor and regulatory confidence.

 

     Murray Pozmanter, Head of Clearing Agency Services and Global Business Operations

 

The digitization of securities processing has intensified in recent years, and we expect this trend to continue in 2022 as innovation via new technologies and platforms set the stage for evolving the clearance and settlement ecosystem. For example, we are excited to bring new efficiencies to settlement through Project Ion, our alternative settlement platform that leverages distributed ledger technology. At the same time, we will continue to enhance existing products and services to deliver greater value to our clients, including our efforts to bring additional counterparties into central clearing for U.S. treasuries.

 

·      Andrew Gray, Managing Director, Group Chief Risk Officer

 

While organizations have prioritized risk mitigation and resilience throughout the pandemic, firms will need to further strengthen that focus in 2022 because, as history has repeatedly shown us, black swan events seem to occur more frequently than in the past. While the risk landscape will remain highly uncertain next year due to the emergence of new COVID variants and their impact on economic growth as well as ongoing inflation, supply chain shortages and energy price increases, risk management professionals must remain vigilant and identify opportunities to further enhance efforts to mitigate risk and build greater resilience to protect their firms and the broader financial system from market shocks and disruptions. In addition, with the frequency of cyber, ransomware and phishing attacks continuing to increase, the industry will need to focus on further strengthening public-private partnerships, participating in war-gaming exercises and making investments in tools and technology as part of their security, recovery and operational resilience strategies.

 

·      Matt Stauffer, Managing Director, Head of Institutional Trade Processing

We expect the ongoing pressures of regulatory and industry demands to continue driving the need for greater levels of post-trade automation throughout 2022.  Over the course of the year, we will see the implementation of CSDR’s Settlement Discipline Regime (SDR) and Phase 6 of Uncleared Margin Rules (UMR). For SDR, firms will seek greater efficiency and integration across the post-trade lifecycle to help prevent penalties and charges related to failed trades and late settlement. For UMR, firms will benefit from further automating the collateral management process, helping in-scope organizations to comply with the Phase 6 mandate while enabling them to use their available collateral more effectively, which should improve capital and liquidity management.

 

·      Chris Childs, Managing Director, Head of Repository & Derivatives Services

 

Over the next few years DTCC and the industry will be focused on a significant amount of regulatory change, as nearly all regulators amend their derivatives trade reporting rules, in part, to respond to CPMI and IOSCO recommendations for greater data harmonization to help promote increased transparency at a systemic level.  We expect the CFTC to implement their changes first, during the course of 2022, with other jurisdictions following in 2023 and 2024.  Over the next year, we will also see the introduction of Unique Product Identifiers (UPI) in preparation for these regulatory changes as well as the definition of ISO 20022 schemas.

 

·      Tim Lind, Managing Director of DTCC Data Services

 

In 2022, we expect to see continued demand for market transparency, and DTCC will be providing more data products to respond to this increased need. We will be focusing in particular on repos, fixed income,  ETF, and other markets where fragmentation of trading occurs and, for these markets, we will be providing firms with comprehensive information to support both risk assessments and valuations as investment and trading decisions are made

 

·      Laura Klimpel, General Manager of Fixed Income Clearing Corporation

In 2022, FICC will continue to lead the conversation around the evolution of the optimal market structure for U.S. Treasuries. The unprecedented volatility in U.S. Treasuries during the pandemic highlighted the importance of making financial services operations more efficient, transparent, and resilient. We’ve reached the point where we have broad industry consensus around the benefits of increased central clearing of U.S. Treasury transactions, which would ultimately reduce risk and improve stability across the industry, and we look forward to working with key stakeholders to make this a reality.

 

·      Michele Hillery, General Manager of Equity Clearing and DTC Settlement Service

 

With firms expected to remain under pressure to reduce costs and risks in 2022 due to ongoing economic and market uncertainty, DTCC will continue to advance efforts to move the U.S. securities settlement cycle to T+1. This will provide capital efficiencies for firms while reducing systemic and operational for the industry, particularly during periods of market turbulence. We are collaborating closely with SIFMA, ICI, regulators and market participants on this critical initiative to strengthen market structure.

 

·      Jennifer Peve, Managing Director, Head of Strategy and Business Development

 

In 2022, digitization in financial markets will continue to grow.  DTCC will remain focused on identifying new ways to advance financial markets through innovation in market infrastructure, including our new Digital Securities Management platform, which will bring automation, standardization, tokenization and efficiency to the private markets leveraging new technologies. As the industry moves forward on its digitization journey, it is critical that the implementation of any changes in post-trade infrastructure be inclusive and accessible, delivering responsible innovation for all, while enabling connectivity optionality, ease of use and delivering value.

 

·      Susan Cosgrove, Managing Director and Chief Financial Officer

 

Next year will test CFOs as we will need to manage through uncertain market conditions and a host of economic challenges, including ongoing inflationary pressures, supply chain issues and possible new corporate taxes. We haven’t experienced a confluence of events like this is many years, and organizations will be looking to their CFOs for guidance on a much wider range of issues. For CFOs, we’ll have to be even more nimble and employ multiple levers to ensure our firms remain profitable while continuing to invest in strategic priorities.

 

·      Keisha Bell, Managing Director and Head of Diverse Talent Management

 

Looking forward to 2022, it will be critical for organizations to remain focused on Diversity & Inclusion while maintaining a collaborative work environment.  Inclusion plays a key role in attracting and retaining talent, and therefore has a direct impact on the achievement of a firm’s ability to meet its corporate objectives. Similarly, a robust Environmental, Social and Governance (ESG) framework appeals to the potential workforce because it aligns to their values. Candidates increasingly want their employer to not only be responsible but to do the right thing. To attract and retain the best talent and achieve the optimal business results, DEI and ESG must continue to stay top-of-mind within organizations.

 

·      Lynn Bishop, Managing Director and Chief Information Officer (CIO)

 

Technology innovation will undoubtedly be a key theme next year as firms continue to modernize legacy technology and build new capabilities to efficiently meet ever-evolving client and industry needs, including robust multi-platform strategies that reduce risk and improve time-to-market. At the same time, resilience will remain a key focus, with firms placing increased emphasis on operational resilience and their ability to sustain business operations. More specifically, there will be a keen focus on application resilience, where resilient capabilities are built in at the application level through reusable, standard architecture patterns. Finally, underpinning all of this is ensuring firms are able to attract and retain top talent while building diverse and inclusive teams and identifying opportunities for employees to reskill and expand skillsets to evolve with business needs such as cutting-edge technology like artificial intelligence, DLT and robotics.

 

·      Marie Chinnici-Everitt, Managing Director and Chief Marketing Officer

 

Over recent years, we have seen a paradigm shift, as more and more marketing teams embrace digital methods to reach their clients and key stakeholders. A recent Forrester report predicted that digital marketing spend would reach $146 billion by 2023, with a compound annual growth rate of 9%. In 2022, we expect to see digital marketing continue to grow, with organizations increasingly using digital technologies and platforms to promote their services. We also expect to see greater alignment between sales and marketing functions as firms consider the complete client lifecycle and lean into the importance of close collaboration across these teams to reach existing and new clients most effectively and to drive business results.

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