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Buy-Side Firms' Systems Not Prepared for Dodd-Frank, Says Study

A large majority of buy-side firms' systems are not prepared for compliance with the Dodd-Frank provisions for central clearing of OTC derivatives, according to a study from SimCorp.

Seventy-seven percent of buy-side firms either do not have or are not sure that they have the proper systems in place to support compliance with Dodd-Frank, according to a survey by SimCorp, a technology provider to the investment industry.

The survey of 120 executives from 60 buy-side firms in North America focused on the issue of preparedness for Dodd-Frank's central trading and clearing requirements for OTC derivatives. The study also finds that 72 percent of respondents consider Dodd-Frank to be a top priority for their organization.

When asked about system support, 77 percent of firms stated that they either do not have or were not sure that they have the right systems in place to support compliance with Dodd-Frank's OTC derivatives central trading and clearing requirements. Only 23 percent of firms are confident that they are prepared for Dodd-Frank's OTC derivatives requirements from a systems perspective.

Additionally, the survey revealed a widespread uncertainty around respondents' ability to comprehensively view OTC derivatives risk and performance. One out of every two respondents admitted that they were not sure their firm was able to capture all OTC derivatives position, transaction and contract data in a single repository for a 360 degree view of risk and performance.

"While specifics around timelines for compliance with Dodd-Frank remain unclear, our message to the industry is to act now in the interest of driving investment performance," stated David Kubersky, Managing Director of SimCorp North America in a press release. "Risk and performance are two sides of the same coin. Whether trading in OTC derivatives or any other instrument, it is critical to have a timely, comprehensive and accurate risk/reward assessment. The system best practices we promote for Dodd-Frank compliance should also be applied when introducing new products, entering new markets and assessing liquidity and exposure." Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

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