Buy Side Takes a Beating at Sibos

In session after session at this year's Sibos conference in Singapore, asset managers were blamed as the major roadblock in the industry's quest for straight-through processing.

In fact, frustration with a perceived lack of interest in STP on the buy side prompted a special session entitled, "In Search of Efficiency--Who should contribute and what role should asset managers play?"

Charges are often leveled by sell-side broker/dealers, custodians and vendors that the buy side will only automate if the costs of new software and its implementation are absorbed. These allegations were refuted in a presentation by Brett Goodin, president of the Asia-Pacific and Japan region for Fidelity Investment Management.

Goodin says the buy side has shown a willingness to move forward with STP but, often, has been met with a chilly reception. He says more involvement from organizations like Swift--the international-banking consortium founded to facilitate cross-border payments and the host of Sibos--will be critical if real progress is to be made.

"It is only recently that Swift has wanted anything to do with the investment-management community," Goodin says. "When we have asked banks and brokers using Swift to adopt standards to trade, we were often met with a wall of refusal."

Speaking to a general-session audience, Goodin says, "If you believe in STP, and you care about asset managers, please break down the barriers in your organizations and help us get connected." He suggests implementing standard protocols to help the buy side more easily handle growth.

Goodin also predicts a continued growth in outsourcing demanded by hedge funds, which traditionally piggy-back on the infrastructure and lending capabilities of prime brokers for their trading. Further outsourcing will be demanded by traditional asset managers, he adds.

Hedge funds, Goodin says, will likely come under increased regulatory scrutiny, as will traditional asset managers that begin to offer hedge-fund-like products. The increase of regulatory oversight will drive managers to outsourcing, he says, instead of continually investing in new compliance technology. But rather than endorsing the new wave of regulatory oversight in the form of scandal-induced legislation, Goodin speaks out against it.

"Is Elliot Spitzer here?" he asks, referring to New York's attorney general. "Everywhere I go he pops his head up and he is making our lives miserable ... This approach of imposing rules is, in many cases, a woolly headed and knee-jerk reaction."

Goodin says that, rather than a lack of rules, four factors have contributed to the scandals of the past few years: incompetence--firms straying outside of their core competency; excessive risk appetite; lack of integrity; and a lack of autonomy combined with inappropriate pressure for short-term results.

"Unless the industry acts with those four things in mind, new rules won't account for a hill of beans," Goodin says. "I think that we are in a spiral of increased regulations and political-points scoring. This is bad."