Consolo
Richard Colvill
04 August 2020
Richard Colvill, senior partner and co-founder of Consolo, the business change specialists in securities finance, talks CPD-certified training and SFTR
Image: Richard Colvill
For those unaware of Consolo can you tell us a bit about the company and what you specialise in?
Consolo has been established since 2015, however, I have been an independent consultant since 2007. The idea of creating a consultancy dedicated to securities finance was born from me wanting to be part of a bigger independent company. I succeeded in doing that over the past few years taking on a partner and several associates.
We are focused on delivering business transformation and project management to established businesses within the securities finance industry. We have had a degree of success in that field over the last five years, and continue to grow where possible.
Tell us a little bit more about your CPD certified training and how this is progressing?
In our capacity as a business transformation and project delivery specialist, we saw a growing need amongst our clients to educate their staff, some of the junior members and perhaps some of their associates outside of the immediate department around securities finance.
We had quite a bit of success in delivering in-house training for these clients. In trying to expand that product, we decided that we needed something tangible other than our time, so the idea of creating the training academy was born in October last year.
Further to taking the idea forward into practice we wanted to add some credibility to it so we joined The Continuing Professional Development Certification Service (CPD), which is a company that has a holistic commitment of professionals towards the enhancement of personal skills and proficiency throughout their careers.
For those companies that are subscribed to them and require that accreditation it gives some much needed kudos to the quality of training, they are the go-to association. We are very pleased to be members. We believe that it strengthens our product, and to be a CPD-accredited member for your training, there is no higher praise in the industry. We believe that our product now has the gold standard when we deliver it.
SFTR, did the delay help and where are we now?
It is important to say that when the delay was implemented at the start of the COVID-19 lockdown that one remembers the work that the various trade associations had carried out. There was the joint venture with the International Capital Market Association (ICMA) and International Securities Lending Association (ISLA) to lobby European Securities and Markets Authority (ESMA) and the policymakers to say that the lockdown would create a lot of trouble for their membership. In the response, although it was not a personal response, but it felt like one in many ways as the timing of it meant it was in direct relation to the letter that was sent by the associations.
When it was delayed by three months, they collapsed phase one which was due to go live in April, and instead consumed it into phase two’s date in July.
Many of the participants that we were speaking to were struggling with system development and the business transformation for that. So the three months gave participants some much needed extra time for go-live readiness. I think most people were grateful for it.
What are the biggest problems clients are having to deal with?
In the time since the Securities Financing Transactions Regulation (SFTR) went live there have been mixed messages from contacts in the market with the biggest issue being individual companies’ readiness for go live. A lot of tier one banks were better financed and resourced, whereas smaller, more bespoke companies are not as ready.
A lot of people were late in starting their reporting, and where there was reporting, the quality of data was always going to be confused with some mismatching on the data fields. The reports we are getting back is that the completion of that is around sub 10 percent. The matching rates were initially very high in the first few days as people were excited, then as the week went on they dropped right down.
There are still some outstanding issues for SFTR; we did work with ISLA, some of the issues from the members were quite confusing. There was a conundrum about actual contractual versus actual settlement dates. The policymakers, rather late in the timeline, delivered their preferred best practice, which went against the grain of what we had decided collectively as an industry. In light of that update, many participants were unable to implement those changes before going live. We are hearing that some of the participants will never be ready for that due to system limitations, and internal legal and compliance issues. So there is a divide there, and the problem in that respect is that if you have counterparts with different opinions about how they can or will deliver, then that will affect matching rates going forward.
But, I think most people are going to report in what they think is the best way possible. The known issues around legal entity identifier (LEI) and unique transaction identifier (UTI) distributions were always going to be an issue for lenders. Their entrance into SFTR reporting is October this year as phase three participants. To enable these phase one and two participants to be compliant in their reporting, they have the minimum data provision. Where they are trading under an agent lender’s construct, if they have any difficulties in providing the beneficial owner breakdown, the borrower cannot report compliantly, so there was always going to be an issue around that.
What next after SFTR?
Like a lot of companies, my focus during the lockdown and furlough, as it has given companies the opportunity to take a long hard look at themselves, and a lot of people are addressing their models. It has given me some much needed time to focus on the inner workings. Recently, we have been focusing our attention to developing the online CPD accredited training academy, which we are very excited about. We have seen a steady uptick from client participation with the online training, and have expanded our suite of offerings there. We are looking to laterally spread across prime services, and will start venturing outside of securities finance. We have taken on new trainers and subject matter experts to provide the on-demand training having initially started with Zoom conference training in several time zones for North America, mainland Europe and Asia Pacific. We had a surprising take up from those places further afield. In light of that, and just to give some broader reach, we are now providing an on-demand set of courses.
We are very excited about the future, and people are definitely buying into the accreditation, so the decision to take that on was important. Our focus firmly remains with that for the foreseeable future.
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