Q1 2019 sees reduced earnings for major programme providers
29 April 2019 London
Image: Shutterstock
Major programme providers have reported reduced earnings in Q1 2019 compared with the same period last year, highlighted by Andy Dyson in the International Securities Lending Association’s (ISLA) ‘Reflections of the CEO’.
Dyson revealed some of the reasons behind losses include regulatory balance sheet constraints through to the absence of specials activity.
He explained: “While it is hard to judge what is the predominant factor that is depressing revenues, the industry is clearly under some pressure as trading desks and senior management look at budget targets for 2019, that was set against the strong performance seen in 2018.”
When revenues are under pressure, Dyson suggested that firms look to reduce their cost base to maintain their bottom-line performance.
Initial signs are not good either with Securities Financing Transactions Regulation (SFTR) and Central Securities Depository Regulation demanding attention and resource, Dyson noted.
He reflected that there are potential green shots of a real opportunity for the industry that will over time radically change the cost base of the industry.
He commented: “Much of the work we are doing at ISLA around SFTR is driving the market towards the adoption of a standard operating model, built around common data definitions and consistent interpretation of life cycle events.”
“Once this work concludes, it will then be only a potentially small step to effectively codify these best practice parameters in the form of a Common Domain Model (CDM).”
Dyson added: “Adoption of a CDM across the industry can also drive further settlement efficiencies, that will reduce the impact of fines for failed settlements and mandatory buy-ins under CSDR as the greater adoption of these best practice models will benefit all market participants.”
Dyson revealed some of the reasons behind losses include regulatory balance sheet constraints through to the absence of specials activity.
He explained: “While it is hard to judge what is the predominant factor that is depressing revenues, the industry is clearly under some pressure as trading desks and senior management look at budget targets for 2019, that was set against the strong performance seen in 2018.”
When revenues are under pressure, Dyson suggested that firms look to reduce their cost base to maintain their bottom-line performance.
Initial signs are not good either with Securities Financing Transactions Regulation (SFTR) and Central Securities Depository Regulation demanding attention and resource, Dyson noted.
He reflected that there are potential green shots of a real opportunity for the industry that will over time radically change the cost base of the industry.
He commented: “Much of the work we are doing at ISLA around SFTR is driving the market towards the adoption of a standard operating model, built around common data definitions and consistent interpretation of life cycle events.”
“Once this work concludes, it will then be only a potentially small step to effectively codify these best practice parameters in the form of a Common Domain Model (CDM).”
Dyson added: “Adoption of a CDM across the industry can also drive further settlement efficiencies, that will reduce the impact of fines for failed settlements and mandatory buy-ins under CSDR as the greater adoption of these best practice models will benefit all market participants.”
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