Agenda

1. Introduction and welcome
2. Minutes of previous meeting
3. Ratify Kathleen Tyson Quah as Chair of the Market Infrastructure Subject Group
4. Tour de table on current market and regulatory developments
5. Scope and priority survey
6. Next meeting
7. AOB

Minutes

Introduction and Welcome

• KTQ welcomed attendees and thanked London Stock Exchange for hosting the event
• KTQ reviewed discussion from the Plenary on scope and purpose of Subject Matter Groups.
• KTQ reinforced that participation in the Group was open, and that attendees should feel free to invite peers with subject matter expertise to meetings as appropriate.
• MW proposed Chatham House Rules be adopted to promote free exchange of views, which was agreed by the Group.
• KTQ requested that GB proceed with scheduling meetings further forward for the year so that guests could be invited to address particular issues raised in discussions. Several guests were considered.

Minutes

• The minutes of the Group’s meeting on 9th May, 2012, were proposed by KS, seconded by MW and agreed.

Ratify proposed Chair of Group

• KS introduced KTQ and invited further nominations for chair. MW proposed KTQ as chair. KS seconded. Unanimously agreed.
• KTQ invited further nominations for co-chair and minute-taker. MW proposed KS for cochair. YP seconded. Unanimously agreed.

Tour de table on current market and regulatory developments

• FSB 3rd Progress Report on implementation of OTC derivatives recommendations has been published, providing significant detail on implementation globally, and encouraging timely compliance by end-2012 deadline
• The sale of LME to HKEX is expected to drive changes in metals markets, with issues around warehousing and expansion in Asian markets
• Markets in emerging economies are maturing rapidly, with some opening to competing exchanges as in Brazil
• The pending EU Financial Transaction Tax is coming in faster than many in the market appreciate and few end users of financial markets will have the resource to anticipate the implications of yet another major market reform. Vendor solutions have not been developed to help with the problem. Many buy side firms are facing operations difficulties as the tsunami of reforms presents too much complexity for ready mapping against business models. Many clients are re-evaluating operations models, looking for outsourced solutions and questioning business scope.
• More effective data capture, maintenance, distribution and transparency between banks and buy side would help address workflow and process issues.
• Infrastructure providers including DTCC and SWIFT are intervening with supervisors to ease the pace of reforms
• International Derivatives Week will likely yield some significant announcements about infrastructure plans and strategy.
• Some global banks are committing serious budget resources to building to emerging needs rather than adapt legacy systems for OTC derivatives processes and collateral management.
• CPSS-IOSCO consultations on Principles for Financial Market Infrastructures are closing 29 July and will have a significant impact on many payments and clearing systems, especially as to liquidity, default management, resolution, client asset segregation and portability.
• As collateral and margin impact pre-trade decision analysis, better mechanisms for price discovery will be required to aid valuations.
• Re-writing of regulations on intra-day margin, securities lending and collateral management will add to the burdens on both markets and dealers as they impact systemic liquidity.
• Proposed EU legislation on sovereign debt ratings may have an impact on the sovereign debt crisis and other reforms going forward.

Scope and priority survey

• KTQ proposed that the Market Infrastructure Subject Group conduct an online survey to aid the group in setting its scope, priorities and deliverables
• It was agreed the survey should be open to peers and clients to get the widest input KTQ is to coordinate the survey via Survey Monkey
• All members of the Group are invited to submit questions or issues for the survey
• A resulting deliverable from the survey might be a living map of market infrastructure based on the Robert Barnes and Hans Brinks models, with links to descriptions and constraints to help users refine their operating models.

Next meeting

• The next meeting of the Group will be 12th July, 16:00 – 18:00 at the offices of Broadridge Financial Solutions Ltd
• Further meeting will be 26th July, 16:00 – 18:00 also at Broadridge
• The Group expressed thanks to PD for offering his offices for the meetings

AOB

• The CAS-WG Steering Group should identify a framework for linking together the work of the subject groups
• YP offered to provide data visualisation for data arising from the survey

Background:

The Market Infrastructure Subject Group is focused upon:

• The impact to margin processes and valuation-risk of CCP’s
• The practical realities of clearing interoperability between differing clearing models
• Further entrants into the CCP space
• The impact of T2S in 2015 to post-trade functions
• The various aspects of the impact of trade repositories

The Group has nominated Kathleen Tyson-Quah of Granularity Ltd as its Chair.