Recent research and white papers

Dropping the Regulatory Hammer: Ten Impending Regulations in US Securities and Investments

by Dushyant Shahrawat, CFA, Towergroup

The securities and investments industry is abuzz with talk of a new regulatory structure and impending new regulations set to take effect in 2009 and 2010. This is expected to be the biggest regulatory change since the 1930s and will have an enormous impact on the securities and investments business. This Towergroup research note discusses 10 new regulatory priorities for the uS institutional securities and investments business as well as the expected impact on the technology and operations functions of institutions to enable securities firms to begin planning for these new rules.

Dropping the Regulatory Hammer: Ten Impending Regulations in US Securities and Investments
www.towergroup.com
Towergroup research note, April 2009

ETFs weather volatile capital markets and report solid growth rates

The exchange traded funds (ETF) sector is one of the few asset management segments that did not only withstand the current financial market turmoil but even reported solid growth rates last year. While the MSCI europe declined by roughly 48% in 2008, ETF assets in europe surged by around 24.3% to eur 112.9 bn in 2008 (eur 90.8 in 2007). The Deutsche Bank report on exchange traded funds looks into the main driving forces behind this development.

ETFs weather volatile capital markets and report solid growth rates
www.dbresearch.com  
Deutsche Bank Research, February 2009

Go or No Go: The Status of Buy-Side Back-Office Projects in 2009

by Dayle Scher, Research Director, Investment Management, TowerGroup

The credit crisis of 2008 will have a prolonged effect on the investment management industry well into 2009 and beyond. The drastic decline in assets under management resulting in reduced revenues is forcing asset managers to make painful decisions about how to meet clients’ needs while keeping expenses down. Their decisions on which development initiatives to proceed with and which to put on hold or even axe will determine how they emerge from the turmoil. This TowerGroup viewpoint summarises numerous conversations with some top-tier global asset managers and assesses the impact of the credit crisis on the investment management community’s back-office technology and operations projects.

Go or No Go: The Status of Buy-Side Back-Office Projects in 2009
www.towergroup.com
TowerGroup ViewPoint Report, February 2009

Global Economic Outlook April 2009, 2nd Quarter 2009

Deloitte’s Global Economic Outlook for April 2009 comments: “Since our last outlook in January, the financial crisis has deepened and become a truly global recession. Economic activity in the United States, Europe, and Japan has declined at an alarming rate. Emerging countries in East Asia and Central Europe have experienced sharp drops in economic activity with the latter at risk of further financial turmoil. Even the BRIC economies that at one time seemed relatively immune to the global financial situation, have experienced serious problems. Global trade has plummeted, causing concern that the increasingly global nature of the economy leads to more rapid transmission of trouble than in the past.”

Global Economic Outlook April 2009, 2nd Quarter 2009
www.deloitte.com
a deloitte research Study, 40 pages, 2009

A practical guide for investment funds to IAS 32 amendments

An amendment to IAS 32 and IAS 1, ‘puttable financial instrument and obligations arising in liquidation’, was issued in February 2008. It requires the classification in equity of some puttable financial instruments and some financial instruments that impose on the entity an obligation to deliver to another party a pro rata share of the net assets of the entity only on liquidation if certain criteria are met. This publication addresses the questions that are arising in applying the amendments in practice.

A practical guide for investment funds to IAS 32 amendments
www.pwc.com
PricewaterhouseCoopers, 14 pages, 2009

IT Spending in Financial Services: A Global Perspective

In this report, Celent analyses IT spending trends across different industry verticals (banking, insurance, and securities and investments) and different regions (North America, Europe, and the Asia-Pacific region, Latin America and Africa). The prime focus of the report is to compare and contrast the direction of IT spending trends among financial services institutions. Celent estimates that global information technology spending by financial services institutions will reach US$353.3 billion in 2009, representing a decline of 1.3% over 2008. This figure is substantially lower than the 4.5% growth achieved in 2008. although the next couple of years will be challenging, Celent expects global spending on iT products and services to grow to US$364.5 billion by 2010, a mere 0.9% CAGR from 2008 to 2010.

IT Spending in Financial Services: A Global Perspective
www.celent.com
Celent, 70 pages, January 2009

Cost per Trade and STP Benchmarking

by Jeremy Smith, Head of Z/Yen Benchmarking, McLagan [Z/Yen]

Most non-financial services industries have longstanding measurements of efficiency, from profitability in sawmills in the US (PWC) to cost benchmarking for mobile phone operators in Europe (AT Kearney). However, formal efficiency measurement in wholesale financial markets is much less developed. There are a number of key reasons for this:

• The continual evolution of financial products makes year-on-year comparison difficult;
• Usage of different technology platforms (both internal and external) leads to incompatible process flows;
• The banks themselves have traditionally focused more on driving business forward than on back office processing metrics.

However, there have been a number of initiatives in recent years to measure back office efficiency and banks have begun to take cost and efficiency benchmarking seriously. This paper outlines the mclagan Z/yen approach to cost and efficiency benchmarking in the back office and sets out two case studies where banks have used both technology and process re-engineering to reduce cost per trade.

Cost per Trade and STP Benchmarking
www.poweringposttrade.net
mclagan [Z/yen], 27 pages, June 2009

2008 IFRS Survey: Where Are We Today?

Given the impending move to IFRSs (International Financial Reporting Standards) in the United States, Deloitte surveyed senior finance professionals of U.S. companies on IFRS issues. The primary goal of the survey was to ascertain U.S. companies’ level of awareness about and interest in IFRSs. This report presents the survey results and analysis, addressing a variety of IFRS topics, including:

• Companies that would consider adopting IFRSs for U.S. reporting purposes, if given the choice by the SEC;
• The expected IFRS adoption date by U.S. issuers in general;
• The timeframe of potential IFRS adoption;
• Overall familiarity with IFRSs and general visibility over local or statutory reporting;
• Potential obstacles to IFRS adoption.

2008 IFRS Survey: Where Are We Today?
www.deloitte.com
Deloitte, 20 pages, May 2008

Portfolio Decisions and Trading: Aligning Execution to Investment Needs

by Matthew S. Simon, Analyst, Tabb Group

Matthew Simon the author of this second Tabb group report introduces his theme by writing, “from traditional mutual fund and hedge fund companies to the largest of broker-dealers and the retail investor, the goal is universal: to find the right portfolio mix and maximize returns for an appropriate level of risk. even when the change in a portfolio is the closing of a single position and the opening of another, that change is made in the context of the rest of the holdings. whether the investment decision stems from a rate cut or an index rebalancing, the goal is to improve the return of the portfolio.” no surprises this far then. but this report goes on to discuss alternative trading systems and technologies that are being developed to the ultimate good of the client.

Portfolio Decisions and Trading: Aligning Execution to Investment Needs
www.tabbgroup.com
Tabb Group, January 2009

International funds and fund management survey

This KPMG survey is a unique, thorough, and authoritative point of reference for financial services companies that market investment funds and hedge funds around the world. This year’s survey is being released at a time of great turmoil and uncertainty in the industry. Asset values are falling and the number of funds is contracting. However, such circumstances also give rise to new opportunities and robust organisations may benefit. One certain consequence of this turmoil is more intrusive regulation at all levels in the future. Therefore having access to up-to-date information on taxation and regulation has never been more important.

International funds and fund management survey
www.kpmg.com
KPMG, April 2009

Execution Cost Management: Improving Margins, Strengthening Relationships

by Matthew S. Simon, Analyst, Tabb Group

“While it is a broker’s fiduciary responsibility to approach every venue necessary to achieve best execution for their clients, they also have the right to manage the costs of fulfilling their obligation,” writes author matthew Simon. This report investigates the proposition that, “brokers who achieve best execution at the lowest possible cost can improve the margins on their execution business, and offer more competitive rates to capture additional market share.”

Execution Cost Management: Improving Margins, Strengthening Relationships
www.tabbgroup.com
Tabb Group, March 2009

Operational risk management in the Nordic financial sector

by Vishal Dugar, Cognizant Technology Solutions

This article concludes that nordic institutions have done a ‘decent’ job of addressing issues of operational risk, despite the fact that there are no ‘apparent returns’ linked to it.

The author examines the way operational risk is handled by the nordic financial sector from a number of angles. He says that they should continue to invest in operational risk management as business in the region increases and transactions become more complex.

Operational risk management in the Nordic financial sector
www.gtnews.com
GTnews, 12 may 2009

Intelligent Risk Management & Compliance Cost Reduction

Although spending on risk management and compliance has spiralled over the last several years, the full value of this investment has yet to be reaped. This report from pricewaterhouseCoopers is about creating a sustainable risk and compliance organisation while reducing inefficiency and improving effectiveness.

The report suggests that cost savings can be made in the areas of risk management and compliance, especially in the more tightly regulated more risk-conscious, postcrisis environment, counterintuitive though this may be. Successful companies, this report concludes, are those where senior management is prepared to adapt to change, take tough decisions and articulate those decisions to employees, the board and the regulators.

Intelligent Risk Management & Compliance Cost Reduction
www.pwc.com
PricewaterhouseCoopers, 25 pages, 2008