Trying to find a unifying theme for last week’s Sibos is difficult. The best I can muster is that we are in a time of clashing extremes. For instance, while SWIFT pushed stability, major markets suffered one of their worst weeks since 2008. Overall, firms face severe competitive pressures, cost-cutting and operational pitfalls as volatility slams everyone. For a moment, though, there was something reassuring about the hustle and bustle of Sibos; the stands were among some of the most elaborate I’ve ever seen. I am old enough to remember the extravagance of the infamous Comdex shows in Las Vegas in the ’80’s and ’90’s. (Comdex is now a more economical, virtualized event.) Sibos compares favorably to those now seemingly decadent days.
On the Sibos exhibition floor, the wine and cocktails, delicious foodstuffs (thank you Citi for the waffles) and swag (XSP had the best) were impressive. The buzz of those milling around the booths at the end of the day, however, was a bit more troubling. There was talk of a potential double-dip recession, the sovereign debt crises in Europe, pending layoffs at firms large and small, and the operational risk procedures of UBS as more details about its $2.3 billion trading scandal emerged.
As I stood amid the glamorous booths, I was suddenly nostalgic for the late ’90’s and early years of the 21st Century. I longed for the now quaint concerns over market data distribution platforms, enterprise-wide risk management strategies, religious battles over Java and Microsoft development tools, the growing importance of and ignorance about derivatives, the Unix vs. Linux vs. Windows wars, the birth of the algorithmic trading phenomenon, the quixotic push for truly multi-asset trading, job-killing outsourcing deals, and the overblown worries about Y2K. Those extremes were real in their time and though they have faded to the background they were easier problems to resolve than current woes.
In a sense, the terrain—far from the Toronto floor of Sibos—is more primal and the stakes much higher than they’ve ever been before.
As regulators and lawmakers hammer out the Volcker Rule, an alleged rogue trader causes a CEO to step down at UBS because of billions in proprietary trading losses. If that weren’t enough, the losses apparently have been a catalyst for a layoff of 3,000 UBS employees. In another extreme, UBS shareholders are now demanding the investment banking division be sold off posthaste.
The extremism doesn’t end with UBS. For the past two weeks, protesters—mostly disenchanted and unemployed young people—have camped out on Wall Street and intend to keep up the battle for a long time. They are challenging a system they don’t seem to understand. Sadly, they may have more reason than anyone else to go to such extremes because the system they’re fighting has failed them.
But, when the world is pulling itself apart, it must be very challenging for middle and back office personnel to concentrate on operational efficiency. Yet somehow they do it. While the world outside cannot resolve its problems, a reconciliations manager can make sense of a botched corporate action; a risk manager can avert a horrendous transaction; and an operations manager at a hedge fund can survive a due diligence inspection.
Staying focused while the world goes to extremes can be its own reward.
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