Elsewhere, outstanding confirmations have also fallen in other asset classes, with interest rates falling from 50 days last year to 14 days, commodities decreasing from 23.3 days to 7.5 days, and equity derivatives trades falling from 50 days to 21 days.
But while all banks were able to meet a target set by the New York Fed to reduce equity derivatives confirmations outstanding for more than 30 days by at least 25% by the end of January 2007, there was a slide in the number of confirmations outstanding between January and February this year, said Tiner.“Had the deadline been February and not January, then a number of firms would have implicitly missed their target,” he said. “It is a pity that the foot came off the pedal, but perhaps this could have been anticipated as we saw a similar, if less pronounced, ‘target deadline hangover’ phenomenon for credit derivatives last year.” Tiner noted that reducing outstanding confirmations for equity derivatives may be more difficult than for credit derivatives due to the diversity of the client base, a lack of inclination by clients to use automated confirmations, and the absence of an industry accepted master agreement for some products. As of February 2007, only 38% of equity derivatives trades were eligible for electronic confirmation. As such, dealers need to play an active role in agreeing master confirmations and encouraging the adoption of electronic confirmation platforms, said Tiner. "The long term success and proliferation of automation in equity derivatives though will likely depend on effective engagement of the client side,” said Tiner. “We are aware this will be more difficult than with credit derivatives due to a more diverse client base, but hope the industry will encourage more clients to develop electronic confirmation capabilities.”