Some interesting new in the last few days to follow up on. We discuss the new SunGard and Pirum tie-up, news on the mechanics of a US debt default, and industry pushback against a new US Office of Financial Research request for securities lending data from mutual funds.
SunGard and Pirum announced today a new tie-up that allows Pirum clients to stream their data into SunGard ASTEC’s database without further deliveries or data cleaning. This is a clever move and one that solves a few long-standing SunGard issues. SunGard can now access a greater pool of cleaned, non-duplicated data, and can get it faster than anyone else can if the client is also using Pirum. The move should also boost perceptions of SunGard’s European market data, which has been a historical competitive disadvantage for the firm. That said, we think this is just good marketing – in practice we’ve found SunGard’s European data to be pretty solid the last couple of years. Certainly the new tie-up ups the ante in competitive positioning between SunGard ASTEC, Markit Securities Finance and DataLend.
On a potential US debt default, an article from Bloomberg cited how the US Treasury could minimize market impact: “A default may not disrupt markets as long as the U.S. alerted traders the night before a payment was due that it was probably going to default, giving the Federal Reserve’s Fedwire, an electronic service that transfers securities and payments, enough time to adjust its programs and allow the defaulted debt to be “transferable,” according to JPMorgan Chase & Co. That would allow them to continue to be used as collateral in repo markets.” While repo markets already don’t want the short dated collateral, this technical deferral could postpone a major impact, especially as Stanford’s Darrell Duffie notes, if interest is still paid even though payment is deferred. The Bloomberg article by Liz McCormick is here.
The Investment Company Institute gave a sharp tongued rebuke to a new report from the US Office of Financial Research (OFR) last week. ICI General Counsel Karrie McMillan, said that “it is critically important also to promote better understanding of the nature and value of our capital markets more broadly. Sadly, a recent analysis by the Office of Financial Research focusing on the activities of asset managers fails to do so. For those of you unfamiliar with OFR, this office was created by the Dodd-Frank Act, and it is supposed to help “facilitate more robust and sophisticated analysis of the financial system.” This particular report will facilitate robust dialogue—but otherwise misses that goal.” We highlighted the OFR’s comments on US mutual funds and securities lending last week here. While Ms. McMillan’s comments were aimed more broadly on the OFR’s concerns about mutual funds and systematic risk, there was enough in this report about securities lending specifically that we expect the topic to come back around in the near future. A link to the ICI speech is here.