Staffing and IT budgets have been hit the hardest by the financial crisis, according to a poll of the membership of the International Securities Association for Institutional Trade Communication (ISITC).
Seventy-four percent of survey participants identified a reduction in headcount as the largest impact of the crisis, while 69 percent pointed to cutbacks in IT spending. Increased compliance demands were cited by 25 percent, and rising trading volumes by 23 percent. The trade group’s 350 member organizations include asset managers, broker-dealers, investment banks, custodians and technology providers.
Market volatility has created clearing and settlement challenges at 46 percent of the firms. These difficulties “were not specific to any instrument, including credit default swaps,” said Genevy Dimitrion, chairman of ISITC and VP of product and technology solutions at State Street Corp. She added, however, that “we do believe that credit default swaps have been a large concern for ISITC member firms.”
While many industry observers have questioned the value of government intervention in the private sector, 61 percent of survey respondents cited increased oversight as an effective means of resolving the current economic woes--14 percent suggested that there should be less oversight. Regulation of pricing agencies was supported by 81 percent and opposed by 14 percent.
ISITC conducted the survey from Jan. 20 to Jan. 31; the 72 participants included a cross-section of management in the securities processing industry. Dimitrion called the results “a snapshot of the state of the financial services markets that will contribute to a more informed discussion of what is happening within the industry.”
Although no mention was made of mark-to-market accounting, believed by many to have had a role in escalating the crisis, 67 percent of respondents were in favor of new limits on leverage, and 74 percent said that the uptick rule should be reinstituted. The uptick rule, which was eliminated by the Securities and Exchange Commission in July 2007, required that short sale transactions be entered at a price higher than that of the previous trade. The SEC has reportedly been looking at its return as a way to curb naked shorting, or selling short without intending to borrow the securities.
John Jay, a senior analyst at Boston-based research firm Aite Group, said that ISITC members’ view on the uptick rule reflects that of the industry as a whole. “There’s a groundswell of support for bringing back the uptick rule for short sales,” he said, including Warren Buffet, who endorsed the rule in a March 9 appearance on CNBC.
At a press conference today, Rep. Barney Frank, chairman of the House Financial Services Committee, said he expects the uptick rule to be reinstated next month.
Regulation was top of mind for survey respondents, said ISITC, driven by the recognition that they need to regain the public’s trust. According to the trade group, many participants noted a “loss of faith in our markets” and said they are focused on “restoring confidence” and “delivering quality products in a challenging time.”
This article can also be found on SecuritiesIndustry.com.
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