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Top 5 Takeaways from SIFMA’s 2024 Ops Conference

One-on-One Conversation with Ken Bentsen and Stephen Byron

In this episode of The SIFMA Podcast, Kenneth E. Bentsen, Jr., SIFMA’s president, and CEO, sits down with Stephen Byron, our new Managing Director and Head of Technology, Operations, and Business Continuity, to discuss 5 key takeaways from SIFMA’s 51st Operations Conference & Exhibition.

Ken Bentsen: Thanks for joining us for this episode in SIFMA’s podcast series. I’m Ken Benson, SIFMA’s President and CEO. I’m joined today by Steve Byron, Managing Director, Head of Technology, Operations, and Business Continuity at SIFMA. Steve recently joined SIFMA from Goldman Sachs, where he served as Vice President and Operations Senior Leader of Equities Post-Trade Transformation and Strategy. Steve joins us today to talk about the five key takeaways from SIFMA’s 2024 Operations and Technology Conference and what’s ahead in the operations space. Steve, thanks for being here today. To kick off our discussion, what would you say was a major theme of the Ops Conference? What are operations professionals talking about most right now?

Stephen Byron: Thanks again and firstly thank you for the warm welcome to SIFMA. Excited to be with you today to talk through the themes from the conference. So diving right in, transformation continues to be the overarching theme that firms are focused on. It was a topic of discussion in every presentation and panel discussion, whether that be regulatory-driven change or discretionary change that firms are working through. There was also a lot of talk on what happened most recently in our industry as well as what firms are focused on looking ahead.

Now looking back, May’s transition to T+1 was a great example of industry collaboration and coordination resulting in a successful outcome. Forward-looking, treasury clearing, and other new regulatory initiatives will be front and center. Firms are also exploring and looking at how to deploy AI and other technologies and digital assets remain a focus area for firms either expanding existing offerings or beginning to explore use of digital assets and new market segments. And finally, I would say resiliency was front and center of what firms are thinking of.

Ken Bentsen: So maybe let’s start with T+1 As I think our listeners know, SIFMA along with ICI, the Investment Company Institute, and DTCC led the industry in a very successful transition. And I think we can point to that as a great example of industry coordination. What’s the recap from the conference on that?

Stephen Byron: So for the most part, T+1 is in the rearview mirror now. That said, there was a lot of discussion around the process, what worked well, and what could have been done better. Overall, the T+1 implementation was a great success. We’re seeing 95 % of transactions are now meeting the affirmation criteria by 9 p.m. Eastern cutoff and trade date. That’s a notable improvement from the 73 % affirmation rate that was recorded at the end of January. Settlement rates have remained steady, if not slightly improved, and we’ve been able to reduce the clearing fund by over $3 billion, which is a material benefit in reducing settlement risk. And they were the main key markers of success when the industry started out. The success of T+1 in the U.S. has also now led to a potential acceleration of efforts globally to shorten the cycles to align to the U.S. with moves both in the UK and Europe beginning to pick up speed. I think this has been a real example of the importance of tight coordination and collaboration to achieve a common goal across the industry and also highlights the key role that SIFMA plays in coordinating and bringing together the industry to work for change.

Ken Bentsen: Yeah, I completely agree with that. And I think I’d like to think and I believe it is true that as the UK proceeds and we expect the EU will as well, that we’ve set a really good predicate for other jurisdictions to move to T+1 in the not so distant future. So that leads us to our next big regulatory mandate that you mentioned before, which is Treasury clearing. What do you think the lessons are that we can learn from the T+1 transition that we could apply for the implementation of treasury repo clearing, goes into effect in a pretty rapid timeline?

Stephen Byron: So firstly, given the importance of the Treasury market, there is no option but to have this move rollout. As a consequence of it not being done well, it’s not something that we or the regulators want to see. I would say that it is more complex than the T+1implementation, given the number of moving parts, although the implementation is more spread out versus the T+1 Big Bang go live. As you pointed out, there are fast approaching implementation dates.

The first of those is coming up in March, by which time CCAs must implement enhanced practices, include risk management, margin, customer asset protection, and access to clearance and settlement services. The second compliance date is then December 31st, 2025, by which time direct participants must be compliant with the requirements to clear cash eligible securities. And the third is in June 2026 where they must be compliant to eligible U.S. Treasury repo transactions. So here at SIFMA we spun up several work streams and the industry needs to come together to resolve challenges that have been highlighted from these working groups. Last week our documentation work stream released standard documentation for Treasury clearing on the Done-Wyft model that was published on September 25th and we’re looking to have documentation for the Done-Away model produced later in this fall. This will provide market participants with an efficient starting point for the onboarding process of new entrants into the clearing ecosystem. There was also a SIFMA podcast that was released last week that highlights many of the treasury clearing sessions that took place at SIFMA Ops. But in terms of lessons learned, we learned a lot of the T+1 that can be applied and highlighted here. So firstly, I’d say break the process down into chunks. understanding what is needed for each of the implementation phases. Determine what needs to be done and who will do what. Setting up a regular cadence of meetings, both internally but also with industry peers and impacted vendors so that you’re not developing in isolation. Collaboration and asking questions of all stakeholders, including the regulators, to get guidance along the way. Operational perspective, map out the processes, understand the interdependencies that exist and where they could or should be decoupled and addressed individually. That interrelation is important, whether it’s internal or external, and will determine what will happen at each point in the process flow. And finally, data is key. So really understanding and having the right data to determine how to prioritize your build.

SIFMA is going to continue to gather the industry and act as a coordinating body with U.S. Treasury clearing as we did with T+1 and we expect to publish an implementation plan in early November in partnership with ENY which will help members work through what they need to be thinking about as this change approaches.

Ken Bentsen: It’s a lot of work, it’s a major undertaking, and a very, very short timeline as you laid out. And so more to come on that here at SIFMA and across the industry. Let’s maybe shift gears a little bit. Obviously, AI, artificial intelligence have been the sort of buzzwords of almost the last year, but it’s really not new when you think about it. We’re constantly seeing it evolve and broaden into more areas of the business in our lives. What was the buzz around AI at the Ops Conference?

Stephen Byron: Yeah, there was actually a lot of buzz around AI at SIFMA Ops. We had a number of panel discussions and speakers on the main stage discussing AI and its implementation. I think firms are at very different stages of their adoption of AI, but they definitely see a lot of opportunities to bring this technology to real-world use cases. There was good discussion around Genitive AI, which is AI with the ability to create new content in response to a prompt that comes from either a human or a machine, and how that can start to be translated into operational workflows.

Another theme that was raised at the conference was that AI is only as good as the data that it’s using or that it’s trained on. So there was discussion around the need for firms to be focused on data and the right data structuring before attempting to layer on AI. As I said earlier, all firms are engaged, but they’re at very different stages of the AI journey. But AI has the potential to be very transformative for the post-trade space. There was also a regulatory component raised, so both from the perspective of the need to oversee where firms are deploying AI, but also the potential for regulators to deploy AI to be more efficient. And they have said that they will continue to play a bigger role as AI evolves there.

Ken Bentsen: And what about digital assets? Was there much discussion on that?

Stephen Byron: Yep, there was and I think the classic conversations are continuing to mature across the industry. I’d say the mainstream here was around sort of opening up new products like private markets where there’s been demand from clients and really thinking about how blockchain can be used to streamline operational processes and look to create efficiencies and cost reduction. There also was conversation around new ways to create and open up liquidity in the secondary market. That’s a brand new application which could potentially open up or improve bottom lines at firms. And it also has the potential to reinvent and rebuild the existing trade stacks over time. So a more mature conversation and beginning to sort of look at different areas of implementation there.

Ken Bentsen: And it wouldn’t be an ops discussion if we didn’t talk about cyber, a key priority for our industry. What are members seeing in the cyber threat area now?

Stephen Byron: Certainly without a doubt our members see cyber threats as the biggest risk. Firms are absolutely focused on the impact of a cyber incident. They’re also beginning to focus on what the operational impact is of that cyber incident that is beginning to come to the forefront of firms’ thinking. Firms are also focused on broader resiliency in a T+1 world. And that was certainly a hot topic at the event. So obviously with the reduced time to process transactions, resiliency in a T+1 world is emerging as a key theme for firms along with third-party risk and potentially fourth-party risk that obviously impacts firms’ abilities to complete their post-trade processing.

Ken Bentsen: So, tying it all together, you have three days or three plus days with almost a thousand operations professionals from the industry together, talking about different issues at the main stage, in the panel discussions, in the hallways in between. What does the job of an operations professional look like in the future?

Stephen Byron: Certainly that was a hot topic at the conference and certainly the role of future operational professionals was broadly discussed. I would say that the overarching view is that operations professionals become more stakeholder and client-focused on how they can help firms generate the bottom line versus being in sort of your traditional processing type roles and enabling firms to deliver more products to customers and by extension then deliver more to the bottom line of firms. As I said, there was a lot of discussion around the use of AI and how that can play a role and certainly broader the use of technology to enhance the connectivity of operation professionals with their clients and key stakeholders was a broad discussion point. I think operations are now seen as innovators. Most firms have very client-facing operations organizations who are often the first line of call, your first line or first person that you pick up and you call. And I think that operations professionals find that environment where they’re being asked to innovate and push forward transformation and change a very motivating environment to operate in. Again, firms are at very different stages of this journey, but that was certainly a theme that came through in terms of people viewing the operational professional as much more of a change engine as we kind of move forward.

Ken Bentsen: So having sort of recap, your first operations conference, are there any parting thoughts that you can share with our audience before we conclude?

Stephen Byron: I think it’s an exciting time to be in our industry with transformation taking place across our members. Whether that be internal transformation focused on deploying new technology or uplifting existing processes or implementing reg-driven change which we know is a main focus for a number of firms as it was with the T+1 implementation earlier this year. Firms are looking to implement solutions in the most automated as as risky first ways. think resiliency, whether cyber or board operational resilience will continue to play a central role for firms as we move through 2025. We’re glad that SIFMA Ops was able to provide firms with unique opportunities to learn from and hear from industry leaders in each of these areas and we at SIFMA look forward to working with the industry for a period of accelerated change.

Ken Bentsen: Well, that’s a great way to close. Thank you, Steve, for this discussion, and thank all of our listeners for tuning in today. To learn more about SIFMA and our work to promote effective and resilient capital markets, please visit us at www.sifma.org. Thank you again for being with us.

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Kenneth E. Bentsen, Jr. is President and CEO of SIFMA. From 1995 to 2003, he served as a Member of the United States House of Representatives from Texas. Prior to his service in Congress, Mr. Bentsen was an investment banker specializing in municipal and housing finance.

Stephen Byron is SIFMA’s Managing Director, Head of Technology, Operations and Business Continuity.

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