27 December 2016
Outlook 2017: Cliff Moyce, DataArt. What Does 2017 Have in Store for the Dodd-Frank Act?
By Rob Daly
Cliff Moyce, Global Head, Finance Practice, DataArt, shares his thoughts with Rob Daly from Markets Media on the need to revise Dodd Frank Act to deal with its unintended consequences that are detrimental to the financial services market. Moyce also talks of the failure of Dodd-Frank to address and control systemic risk by merely reducing exposure to the actions of individual firms on each other.
“I fully expect the Dodd-Frank Act, including the Volcker Rule, to start to be reviewed in 2017 with a view to possible revision over the next couple of years.
One of the main objectives of the Act was to reduce systemic risk by bringing transparency to opaque OTC markets. For example, through the use of centralized trading facilities (SEFs, MTFs, and etc) and improved post-trade reporting. It also sought to reduce systemic risk through central clearing and full margining. Though those things undoubtedly reduce exposure to the decisions and actions of an individual firm on another individual firm, to claim that they reduce systemic risk to a significant degree is to fail to understand the nature and scale of systemic risk. Systemic risk is driven by the extreme cross-product / cross market / cross geographic (geopolitical) / cross currency / cross-regulatory regime nature of capital markets trading and investment management. …In this light, Dodd-Frank and Volcker appear to be whistling in the wind.
But Dodd-Frank should not be revised or repealed because it is not fully achieving its aims of controlling systemic risk… Revisions should be made to deal with the unintended consequences. They include some market participants being priced out of the market though increased costs (collateral and margining costs); the effect of making some markets near moribund; and, the loss of investment in customer service – including failing to address the desperate need to re-engineer legacy systems to give clients of financial institutions the levels of services to which we have become accustomed through ecommerce etc.”