The OTC derivatives clearing mandate is upon us.
We will be running a series of Prezis called the “Making lemonade from lemons” series. This series, like our similarly titled whitepaper, will be looking beyond compliance to the Dodd-Frank Act (DFA), and examining the opportunities for competitive advantage that the challenges of the DFA present.
The Prezi is best viewed in full screen mode (for normal sighted folk),
and may also be found on the Prezis and Case Studies tab on our Whitepapers and Case Studies page.
The Tabb Group – in a 2011 presentation to the Commodity Futures Trading Commission’s (CFTC) Technical Advisory Committee – estimates that the largest US OTC derivatives dealers will spend a total of $1.8B on Dodd Frank (DFA) related technology costs; with the top eight spending over $1.5B.
An August 2012 update to a 2010 S&P analyst report puts its annualized estimate of DFA-related technology and related expenses for the top eight US banks at $2.0/$2.5B.
Throw in the profound and fundamental changes the regulations have wrought on OTC derivatives market structure, business models, terms of competition and future earnings expectations – and that’s a lot of chucked lemons.
This new Acuity Derivatives client report From Regulatory Compliance to Technological Advantage (making lemonade…) seeks to show that given the fundamental nature of changes to the OTC derivatives industry and also the high technology costs involved; that the deployment of this technology spend should not be viewed solely in the context of sunk compliance costs, but in the context of investing for competitive technology advantage.
Our whitepaper on P&L attribution (PLA) is now available for download.
The paper examines the practice of PLA production, analysis and reporting within banks. Given the recent regulatory focus on PLA and banks’ capacity to produce it, the report also examines areas of potential interest i.e. policy, governance, process capacity and metrics that can be used to benchmark the bank’s capacity to produce, analyze, monitor and report PLA.
This example Excel spreadsheet illustrates the classification of derivative products into risk factor taxonomies. This could be for the purpose of evaluating their risk profiles e.g. for P&L attribution.