There are doubts about whether the Global Straight Through Processing Association (GSTPA) and a consortium of Thompson financial services and the DTCC, the US central depository and clearing utility, will be able to work together in achieving interoperability between their planned trading platforms. Speaking at the International Securities Services Association tenth symposium, Steve Crosby, chief executive of the GSTPA and Robert McGrail, chairman of the DTCC/Thompson consortium, agreed they would co-operate towards interoperability.
GSTPA has almost finished raising Sfr160m (E103m) to fund a new system. There are two distinct infrastructures and John Gubert, head of group securities at HSBC, says the market will only be satisfied when the systems can operate as one. He doesn’t doubt the sincerity of the two groups, rather it’s more a logistical problem: “I think they will try to seek interoperability but the jury is still out as to how simple or difficult it is to achieve what the market will want.” Historically, interoperability has been notoriously difficult and even elusive. “You only have to think of the cost and effort that was put into the bridge between Clearstream and Euroclear over the years,” he says.
At the symposium, the ISSA also ratified the ISSA recommendations 2000, a paper published later this month that lists eight significant changes to the security services industry. The proposals have a strong bias towards technological developments. In line with the move towards straight through processing, the paper will push for a global client and counterpart identification system.
It also identifies five goals to reduce settlement risk. These include adoption of T+1 settlement and the establishment of mandatory trade matching and settlement performance measures. To facilitate greater investor protection, the report will recommend regulators clarify legislation on cross-border transactions and seek international agreement on a legally enforceable definition of finality in securities transactions.
The symposium reviewed changes to US regulations on withholding tax, due at the beginning of next year. Non-US investors will be required to provide greater details to qualify for tax benefits and the symposium believes the new legislation will deter inbound portfolio investment into the US.