Increasing transparency will help to keep costs low while also addressing market safety concerns, according to panellists speaking at the Market Infrastructure Forum at Sibos in Dubai.
Panellists said there was an inherent conflict between keeping costs as low as possible for market participants, while also meeting regulatory demands for increased safety.
Mathias Papenfuss, head of operations for Clearstream International, said transparency was vital to reducing the systemic risks within the financial system, but said there are conflicts inherent in how regulators and market infrastructure providers approach these issues.
“There’s a classic dilemma in the approaches taken by industry and regulators. From our perspective as a post-trade service provider it’s all about cost reduction and improving the efficiency of how we operate. For the regulators, it’s all about improving safety and risk reduction and there’s not always an obvious solution to this,” he explained.
While reducing costs and improving safety can often be at loggerheads, increased transparency should drive reliability while also enabling continuation of business and efficient disaster recovery.
Larry Thompson, managing director and general counsel at the Depository Trust and Clearing Corporation (DTCC) said transparency was the key goal of regulators and effective implementation of this will drive efficiency and also improve market safety.
“Transparency drives everything; if you have transparent markets, then your central counterparties (CCPs) will work better, your central securities depositories (CSDs) are going to be more efficient in terms of managing operational risk and you will be able to cut costs more significantly,” Thompson said.
He argued that it was important that risks in the financial system be reduced in order to prevent taxpayers from having to pick up the costs of a future financial crisis. However, he said that making risks transparent so they can be identified and dealt with was the most efficient way to achieve this.