Market Practices Council Meeting Recap

Laserlike Focus on Market Practices - Market Practices Council Chair Steve Chittenden of Loomis Sayles was the moderator of an Association-sponsored event on June 26th that has sharpened the buy-side's focus on implementing several pivotal regulatory reform policy initiatives.

In a nutshell, here is what the industry learned during three hours of remarks & panel presentations by 15 guest speakers on the 26th:

MBS Margining Recommendations & Rule Proposals - FINRA will move ahead this summer with a revised version of proposed rules, taking into account the comments of market participants, including member firms of the Market Practices Council, who believe maintenance margin would impose unfair burdens on certain investment accounts. FINRA's Board will consider these revisions in July; then the industry will have another opportunity to comment.

So far, there has been very constructive dialogue involving FINRA and the Treasury Market Practices Group, according to FINRA EVP Bill Wollman. Mr. Wollman was the keynote speaker at our event on June 26th that was held at the Harvard Club in Boston, MA.

Cybersecurity - The big takeaway was that cybersecurity is clearly a task for all employees at institutional investment advisers. Peter Allor, a Security Strategist in IBM's Critical Infrastructure Group, drove this point home by citing the growing number of private sector strategies designed to reduce cyber vulnerabilities. The Market Practices Council is planning to announce practical compliance-related presentations on cybersecurity which will involve full & associate member firms very shortly.

National Futures Association (NFA) - The NFA was represented on June 26th by John Brand, who serves as a Managing Director in its Compliance Department. John very respectfully introduced the NFA to the Boston buy-side community. Moreover, the Association of Institutional INVESTORS appreciated the opportunity to submit comments to the NFA in April regarding possible capital requirements that would apply to Commodity Trading Advisors and Commodity Pool Operators. These possible requirements would affect the activities of investment advisers as Dodd-Frank provisions have resulted in an expanded NFA role concerning the regulation of swaps. Mr. Brand indicated that NFA officials are still reviewing industry comments concerning CTA / CPO capital requirements.

Fixed Income Market Structure - Jim Rucker, Credit & Risk Officer of MarketAxess, served as moderator of a panel presentation that discussed current trends involving asset managers' bond trading practices. This presentation has further advanced the likelihood that a Trading Executives Council would be a good fit for the Association, both in terms of industry-wide education and as a group that might provide relevant support for our various advocacy initiatives. More info is expected shortly on the status of this new Council!

Shortened Settlement Cycle Initiative - The Association was pleased to receive a DTCC update on June 26th. DTCC is spearheading the next phase of this industry initiative, subject to feasibility analysis, to shorten the securities settlement cycle for equities, corporates and municipals to T + 2. Linda Wondrack of Fidelity Investments, who is Vice Chair of the Association of Institutional INVESTORS, is serving on the Steering Committee formed by DTCC to oversee this undertaking. The Steering Committee is set to meet in NYC in mid-July.

On a related matter, the buy-side is working with DTCC concerning the next EMIR reporting requirement; namely providing input to authorized repositories relating to collateral tied to swap transactions. The effective date for this new and fairly complex reporting, which in many instances may be delegated to dealers, is August 11th.

WEBCAST REPLAYS of the above-mentioned June 26th presentations are available to members upon request. Feel free to contact Joe Sack, Staff Adviser to the Association of Institutional INVESTORS.