Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
DTCC launches consulting business
DTCC, the global industry-owned provider of infrastructure for post-trade financial services, is entering the consulting business, with a niche advice offering specific to the post-trade processing space.
Post-trade processing is where DTCC (the Depository Trust & Clearing Corporation) provides much of the existing infrastructure for institutional trading, offering “build it once, use it many times” mutual services. The firm has engaged Quorsus, which provides specialist consulting services to a range of financial institutions, to support the launch of the consulting business.
Chris Childs, DTCC managing director and head of repository and derivatives services, said: “Our unique position and vantage point enable us to provide our clients with guidance and recommendations to decrease risk and lower the cost of meeting regulatory and industry-driven requirements at a price-point that reflects genuine value.”
As the industry faced an unprecedented swathe of regulatory, financial and operational challenges in 2020 and beyond, DTCC remained committed to supporting firms in more effectively managing all the changes, he said. “DTCC’s consulting framework covers initial diagnostics through to the design, implementation and project management stages.”
In Australia, the post-trade ‘infrastructures’ are known as ‘ALERT’, the largest online global database for the maintenance and communication of standing settlement instructions (SSIs) and for central trade matching (CTM) of cross-border and domestic transactions. Other infrastructure solutions include DTCC’s ‘Global Trade Repository’ and its ‘Margin Transit Utility’.
The post-trade space has been battered by constant regulatory and technology changes, mostly emanating from reforms after because of lack of transparency during the GFC. DTCC believes clients need help navigating existing and coming regulatory and operational demands.
Asked how it would handle potential conflicts which might flow from adding a consulting business alongside a product-orientated service, Childs said: “We view DTCC Consulting Services as a new way to share our post-trade expertise with our clients. Clients are able to access the breadth and depth of DTCC’s post-trade processing experience and leverage DTCC services, where appropriate, to help them transform their post-trade business operations, increase efficiencies, reduce risks and drive down costs.”
He thought that DTCC’s consulting offering would complement those of generalist technology consultants, such as Deloitte, PwC and KPMG because of its unique vantage point in the post-trade process. “Any DTCC client seeking to improve their post-trade processes may want to use our consulting services,” Childs said.
– G.B.
