FLASH FRIDAY is a weekly content series looking at the past, present and future of capital markets trading and technology. FLASH FRIDAY is sponsored by Instinet, a Nomura company.
It is that time when people are going to too many holiday parties, eating and drinking too much, looking back over the past 12 months and making resolutions for the coming new year.
Meb Faber, co-founder and chief investment officer of Cambria Investment Management, highlighted the list of ’52 things I learned in 2023’, by Tom Whitwell:
- The UK government recently changed the law to ban company names containing computer code, after Michael Tandy of Hatfield registered a company called “; DROP TABLE “COMPANIES”; — LTD,” which could theoretically erase the companies house database. [Alison Thewliss MP]
- Only 28 books sold more than 500,000 copies in the US in 2022. Eight of them were by romance novelist Colleen Hoover. [Jason Colvato]
- Scientists in Singapore have developed a tiny flexible battery, powered by the salt in human tears, designed for smart contact lenses. [Yun Jeonghun]
There were a long list of geopolitical shocks in 2023 and these look likely to continue next year. Geopolitical risk came top of the annual Systemic Risk Barometer Survey from DTCC, the US post-trade market infrastructure, for the second year in a row.
More than three quarters, 81%, of respondents cited geopolitical risk as the most significant risk for financial services in 2024, higher than the 68% last year.
Inflation was identified as the second most significant risk by just over half, 55% of respondents, down from 61% last year. DTCC said some respondents indicated that they expect inflation to be lower one year from now, alongside decreases in consumer demand and economic activity.
Timothy Cuddihy, group chief risk officer at DTCC, said in a statement: “Firms must regularly review and evolve their risk management practices as the risk landscape shifts by conducting scenario planning exercises, implementing new, modernized recovery and resilience capabilities, and continuing to train their employees on the threat landscape.”
The US election in 2024 was also cited by 51% of respondents as a top risk. This was the top advancer this year, increasing from 21% last year, according to the DTCC.
Virginie O’Shea, founder of consultancy Firebrand Research, highlighted in an email that there may be some apprehension about the year ahead but that operations and technology teams will be extremely busy.
“Fintech funding has been hard to find over the last 12 months and going into 2024, the economic outlook is pretty grim,” she added. “On the bright side, however, there should be a lot of impetus to spend in the post-trade arena as the North American markets prepare to shorten their settlement timeframes by one day.”
The standard settlement cycle for most US broker-dealer transactions in securities will be reduced from two business days after a trade, T+2, to T+1 on 28 May 2024 in the US and on the previous day in Canada. The US Securities and Exchange Commission said the aim is to reduce latency, lower risk and promote efficiency and greater liquidity but it requires streamlined and efficient operational processes, presenting an opportunity to increase post-trade automation.
The majority of the asset managers, 59%, said a higher rate of settlement failures will be the main consequence of the impending T the+1 deadline according to the latest annual Future of Finance report from SIX, the Swiss financial market infrastructure. Maybe one of the industry’s resolutions should be to make sure this does not happen.
