Grygo is the chief content officer for FTF & FTF News.
Some observers on Wall Street are saying that the global pandemic may be heading toward an end phase.
I hesitate to agree with that prediction given the many unexpected riptides that the potentially fatal COVID-19 virus has imposed upon the world since its onset in 2020 (or even sooner).
So, while we hope that the situation improves, there are some striking lessons the securities industry in New York City is learning, says New York State Comptroller Thomas P. DiNapoli via his annual report on the real Wall Street firms.
In addition to its own research, the comptroller’s report cites a report that the DTCC put together earlier in 2021 based upon surveys of market participants. (FTF News covered the DTCC report on April 21 and the story can be found here: https://bit.ly/32AMKJ2 .)
“The survey highlighted the resiliency of the industry during a period of unprecedented volatility and volumes, and with nearly all operational personnel working remotely,” according to the comptroller’s report.
But, between the lines, some post-trade operations may not have been so resilient.
“The findings included a consensus for further simplification and standardization of post-trade services (such as trade reconciliation and collateral management). A majority of the firms surveyed (both buy-side and sell-side) planned to increase their capacity or transform their processes to improve post-trade services,” the comptroller’s office notes. “The report also cited the need for shortening settlement cycles given the impact a sharp increase in trading volume and volatility had on liquidity and margins (i.e., borrowing against owned securities).”
Basically, the DTCC verified that the lockdown — which caused many Ops staff members to work remotely — brought into stark focus the many post-trade problems that need to be fixed ASAP and without hindrance via excuses, manual workarounds, and budget cuts.
We will see if the urgency for post-trade reforms remains fervent or will fade as the industry moves away from working remotely.
The comptroller’s report also had a few things to say about Wall Street’s foot soldiers and their return to the office after a deadly viral attack.
Not surprisingly, the report finds that Wall Street employees are back in the office. However, there are nuances to be noted about this return.
“Based on a pre-pandemic nationwide survey, the securities industry has the highest share of workers able to work from home, at 98.5 percent. For the overall finance and insurance sector, the share is lower at 90 percent,” according to the comptroller’s report.
“The difference between the share of workers who are able to telework and who actually telework is significant for finance and insurance, as more than half of those who are able to telework are not doing so,” according to the report. “Much of this can be linked to the nature of the financial sector (i.e., sales and trading, and investment banking), which relies heavily on the pace and impact of worker collaboration, such as at trading desks.”
Although not part of the comptroller’s report, it’s clear that many in the executive suites as banks and other financial services firms prefer to have staff within their much more secure networks rather than remote links that are often vulnerable to cyber-attacks, including those who would commit ransomware.
In addition, the comptroller cites an August survey by the Partnership for New York City that found that “29 percent of financial services employees in Manhattan have returned (either hybrid or full-time) to their workplaces, up from 14 percent in May. This level is above the overall share (23 percent) of Manhattan office workers who had returned as of late August (up from 12 percent in late May).”
It appears that Wall Street commuters prefer the services of the controversial Metropolitan Transportation Authority (MTA) to limousines and app-linked car services.
“A higher share of securities industry employees are commuters. In 2019 (the latest year for which data is available), 41 percent of the City’s securities industry employees commuted from outside of the City, which was the highest share among any major industry,” according to the comptroller’s report. “The average daily round-trip commute time for a non-City-resident industry employee is slightly more than 74 minutes, which is the highest of any industry. The subway was the primary mode of transportation for 43 percent of securities employees, higher than the rest of all industries. Commuters from outside the City face the added time and cost of transportation.”
The DiNapoli report notes that “temporary or permanent relocations that occurred as workers were able to work from outside the office may also have impacted the location of some securities workers’ residences.”
Although I never witnessed it among those in the Wall Street community, there apparently was a stigma about working from home. But it may be going away.
“The survey also revealed that the stigma surrounding work-from-home and productivity appears to have been removed, with many firms looking to retain some form of flexible working arrangements,” according to the comptroller’s report. (The full DiNapoli report can be found here: https://bit.ly/3bWMBnJ )
“Half of the respondents were expecting to adopt a flexible working model that would include two to three days of remote work per week for most employees. While this is slightly lower than the 70 percent of overall City office employers who are adopting a hybrid work schedule as surveyed by the Partnership for New York City, it still demonstrates a departure from pre-pandemic operations for the industry as a whole,” according to the comptroller.
I suspect that better post-trade operations and far more flexible working models will be departures from the past, and not the only ones.
Need a Reprint?