ISLA publishes best practice guide
16 October London
Image: Shutterstock
The International Securities Lending Association (ISLA) has released its new best practice guide for operational processes for securities lending transactions at its 8th annual Post Trade Conference 2017.
The guidelines are intended to provide a standardised approach to securities lending through the global master securities lending agreement (GMSLA) and work in conjunction with the Bank of England’s voluntary UK Money Markets Code, which was published in partnership with ISLA in April.
ISLA’s code offers high level principles of conduct while the best practice guide providers a day-today guide for processes and procedures.
Advice on conduct rules, arbitration, standard settlement instructions (SSIs) as well as rules surrounding processes for equities and fixed income loans are all covered in the guide.
On trade matching, the guide suggests that once a transaction has been agreed counterparties should verify that they agree the terms of the transaction.
A post-trade, pre-settlement, process of verification should be performed promptly after the execution of a trade, which means as soon as possible after the trade is executed and prior to the security
settlement system.
On collateral, ISLA suggested that a a margin or haircut should be based on the calculated risk of loss. The higher the risk of lending client, the higher the margin/haircut should be.
On compliance with regulation, ISLA stated that, in line with Basel III, each entity must ensure there are sufficient resources allocated to collateral management to ensure there is an efficient margin call agreement and collateral settlement process.
ISLA clarified that if there is a conflict between its guide and the GMSLA then the legal document
should overrule.
Jonathan Lombardo, newly elected chairman of ISLA’s executive operations committee, said: “As a trade association representing the common interest of market participants, it is our responsibility to set guidelines and standards for member firms to establish best practice codes that provide stability and a high level of operational efficiencies, that maintain the robustness of the market.”
He added: “ISLA recognises that standardised processes are critical to the future stability of the securities lending market and with a unified membership approach, the market will be better placed to embrace both innovation and regulatory enforced change.
“It also enables us to assure regulators that we as an industry can achieve and maintain a robust, sustainable marketplace for our business.”
A spokesman for ISLA speaking at the post-trade event said: “The financial crisis of 2007-8 proved that, moving forward, global coordination is key.”
Alongside the publication of its operational guide, ISLA also finalised its new board last week, with Lombardo set replace Andy Krangel as chair for a two-year term, effective November.
Lombardo will remain in his current role at Eurex Clearing as senior vice president of funding and financial markets.
The guidelines are intended to provide a standardised approach to securities lending through the global master securities lending agreement (GMSLA) and work in conjunction with the Bank of England’s voluntary UK Money Markets Code, which was published in partnership with ISLA in April.
ISLA’s code offers high level principles of conduct while the best practice guide providers a day-today guide for processes and procedures.
Advice on conduct rules, arbitration, standard settlement instructions (SSIs) as well as rules surrounding processes for equities and fixed income loans are all covered in the guide.
On trade matching, the guide suggests that once a transaction has been agreed counterparties should verify that they agree the terms of the transaction.
A post-trade, pre-settlement, process of verification should be performed promptly after the execution of a trade, which means as soon as possible after the trade is executed and prior to the security
settlement system.
On collateral, ISLA suggested that a a margin or haircut should be based on the calculated risk of loss. The higher the risk of lending client, the higher the margin/haircut should be.
On compliance with regulation, ISLA stated that, in line with Basel III, each entity must ensure there are sufficient resources allocated to collateral management to ensure there is an efficient margin call agreement and collateral settlement process.
ISLA clarified that if there is a conflict between its guide and the GMSLA then the legal document
should overrule.
Jonathan Lombardo, newly elected chairman of ISLA’s executive operations committee, said: “As a trade association representing the common interest of market participants, it is our responsibility to set guidelines and standards for member firms to establish best practice codes that provide stability and a high level of operational efficiencies, that maintain the robustness of the market.”
He added: “ISLA recognises that standardised processes are critical to the future stability of the securities lending market and with a unified membership approach, the market will be better placed to embrace both innovation and regulatory enforced change.
“It also enables us to assure regulators that we as an industry can achieve and maintain a robust, sustainable marketplace for our business.”
A spokesman for ISLA speaking at the post-trade event said: “The financial crisis of 2007-8 proved that, moving forward, global coordination is key.”
Alongside the publication of its operational guide, ISLA also finalised its new board last week, with Lombardo set replace Andy Krangel as chair for a two-year term, effective November.
Lombardo will remain in his current role at Eurex Clearing as senior vice president of funding and financial markets.
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