What will be the theme of this year’s CASLA conference?
Rob Ferguson: This year’s Canadian Securities Lending Association (CASLA) Conference on Securities Lending will have a familiar theme, around regulatory change and its effect on securities lending.
So regulations such as Basel III and the US Dodd-Frank Act, and the knock-on effects, including the importance of collateral, and balance sheet and collateral management concerns.
We are going to follow the same sort of agenda that we have in the past—we have an equity panel, a fixed income panel, and speakers representing hedge funds.
But the cornerstone of the conference will undoubtedly be the regulatory session.
How important is the conference to securities lending professionals?
James Treseler: The Canadian Securities Lending Association Conference is an important conference for the teams, mostly for networking.
People forget what a huge place Canada is and how hard it is to get around—especially when winter lasts for 10 months of the year.
How would you describe the Canadian securities finance market?
Treseler: The Canadian market is quite robust, and it would look far more significant if it wasn’t next door to the US market.
It’s like having a sycamore tree next to a large oak. The sycamore gets lost because the oak tree is in front of it.
Canada is a rather significant markeplace in securities finance.
Ferguson: The Canadian market remains very strong, with healthy demand, particularly on the fixed income side.
From what we have seen in the markets, while Canada is still a predominantly non-cash collateral market, the interest in and acceptance of cash as collateral continues—particularly on the agency lending side.
On the equity side, I would say that the market has been unspectacular.
I think the demand has been good and consistent, but is mostly general collateral demand—there haven’t been many specials.
Treseler: The Canadian markets are also slow to open up to various forms of collateral, which I think is a healthy thing for the market.
We are also seeing different strategies employed and reinvestments, which are allowing some players to take something more than dollars, and we need that type of flexibility.
What we’re seeing more and more in the Canadian market is the experience of Canadian players outside of Canada.
What about the ETF industry?
Ferguson: The exchange-traded fund (ETF) industry has been one of the bright spots in Canada.
There was a change in the Canadian regulations last year that expanded the ETF market by allowing all exchange-traded assets to be lent, so that has increased demand.
Besides that, there haven’t been substantial changes in regulations coming out of Canada—the impacts have really come more from the US and some of the European regulatory and tax changes, and their effects on us.
Those are what have been keeping Canadians busy.
Treseler: Globally, you’re seeing improvement in market demand for exchange-traded funds, but it’s quite slow outside of the US.
The US has an enormous market, mostly because of the retail supply in the market. We’re seeing some growth, but it’s extremely slow.
Finally, how has the merger of CIBC Mellon’s and BNY Mellon’s securities lending operations been going?
Ferguson: The merger has gone exceptionally well. We have worked very closely with BNY Mellon for many years, including in our securities lending programmes.
We were already working together from a marketing and product perspective, and even shared our systems. I expected that even though it was a very big project that it would go smoothly, but even so, I have been pleasantly surprised at how seamless the transition has been.
We’ve always used BNY Mellon’s core custody system, but the securities lending system, we have the same version but separate instances, and we have merged to one instance.
This was a big job, and there was a lot of work that had to be done on that. We had a lot of static information—thousands of records—that needed to be updated, including client information on limits and restrictions, down to specific security restrictions for specific clients.
All of those had to be reproduced in the target system, and vetted and tested
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