PASLA: Geopolitics drives change in the global regulatory agenda
27 February 2025 Macau
Image: SFT
More than ever, financial services legislation is being heavily influenced by geopolitics across the globe, according to Farrah Mahmood, director of regulatory affairs at the International Securities Lending Association (ISLA).
2024 was a significant year in which several countries held elections, resulting in a shift in political sentiment across all regions.
Speaking at the 2025 Annual Conference on Asian Securities Finance, held by the Pan Asia Securities Lending Association (PASLA) in Macau, panellists discussed the core themes for the year, as well as significant market movements in South Korea and China.
Opening up the panel, Mahmood noted that the shift in political sentiment has caused an increase in fragmentation within the regulatory landscape — this has led to a rise in cost and complexity for international firms.
“With the outcome of the US elections meaning a second Trump term, there's heightened risk that key jurisdictions are going to start to move towards more national, protectionist type measures, and to an extent, we're already seeing that play out in trade disputes,” Mahmood warned.
For trade associations, Mahmood indicated that both PASLA and ISLA will need to play a larger role in advocating on behalf of the securities finance market.
In terms of global themes, competitiveness, operational resilience, and the retail space were named as the three largest focuses for the market.
The EU and the UK have extensive competitiveness agendas, Mahmood explained, both with fairly new governments which look to simplify and consolidate rules that are already in place as part of their new mandate, rather than expanding the current rule book.
While the Middle East has significant growth agendas such as the Saudi Vision 2030 — focused on foreign investment and deepening liquidity — in the US, President Trump is looking to deregulate across multiple industries such as with digital assets, crypto and sustainability.
Following a cyber attack last year on one of the market’s trading platforms, Mahmood noted an increase in similar incidents across multiple different industries, including financial services. As a result, there is a “huge focus” from regulators on the reliance of critical third parties, particularly where several firms are dependent on a small group of providers.
Moving forward to the third theme of the year, Mahmood said that the UK’s move to introduce consumer duty rules in 2023 “set the stage” for other global regulators focusing on increasing investor protection rules.
She advised: “We need to make sure that those underlying retail clients are well educated about the product and are aware of the associated risks involved with that.”
Attendees of the conference also heard from Jisuk Kim, senior foreign attorney at Kim & Chang, who discussed movements in South Korea with the upcoming lift in its short sell ban, which is expected to come into effect on 31 March.
The short sell issue started back in 2021 from the amendment of the law strengthening the penalties for breaches in the short selling requirements and the government’s investigation over short selling practices of foreign institutions, amid vocal retail challenges against short selling by institutions, she explained.
Following investigations into short sale and stock borrowing and lending practices of foreign investors investing in Korea, Kim explained that penalties for short selling breaches have become stricter. “In fact, the supervisory authority imposed quite significant unprecedented amount of penalties. Also, intentional breaches in the short sale requirements can be subject to criminal liability.”
On the retail side, there have been complaints about not gaining equal opportunity with institutions, and the regulations have been amended in an effort to level the playing field, she noted.
Kim added: “Internal control requirements have become very prescriptive on the part of all players in the market. The implementation of the internal control at the institutional level will be a pre-requisite to engaging in short selling upon lifting of the short sale ban, and this is going to be a key factor going forward for anybody that wants to enter the short sale market.”
To help monitor short selling operations, Kim mentioned the development of a naked short sell detection system by the country’s stock exchange, which “is the first of its kind in the world”.
Kim believes there will be plenty of time spent this year in preparing to comply with the new requirements in order to engage in short selling in the market.
It was also recently announced that Korea would release the RFI regime, which allows financial institutions to access the Korean foreign exchange market from offshore by registry.
Kim said: “More players are now going to be able to participate. It was only banks and securities markets, but now insurance companies can do that also. Foreign RFIs will now be able to trade directly between each other.
“Custodians will be able to open up FX trading accounts to cater to their foreign clients interests. That's an area that is going to be pretty big for foreign investors to watch.”
Adding to the opportunities in APAC, China saw the recent introduction of Bond Connect offshore repo, which allows offshore participants to repo onshore bonds held by them via Bond Connect.
China has the second largest bond market globally. With the introduction of Bond Connect repo, there is a possibility to use onshore bonds for financial transactions.
While there are opportunities globally for the securities lending market, participants will be keeping a close watch on the changing regulatory landscape.
2024 was a significant year in which several countries held elections, resulting in a shift in political sentiment across all regions.
Speaking at the 2025 Annual Conference on Asian Securities Finance, held by the Pan Asia Securities Lending Association (PASLA) in Macau, panellists discussed the core themes for the year, as well as significant market movements in South Korea and China.
Opening up the panel, Mahmood noted that the shift in political sentiment has caused an increase in fragmentation within the regulatory landscape — this has led to a rise in cost and complexity for international firms.
“With the outcome of the US elections meaning a second Trump term, there's heightened risk that key jurisdictions are going to start to move towards more national, protectionist type measures, and to an extent, we're already seeing that play out in trade disputes,” Mahmood warned.
For trade associations, Mahmood indicated that both PASLA and ISLA will need to play a larger role in advocating on behalf of the securities finance market.
In terms of global themes, competitiveness, operational resilience, and the retail space were named as the three largest focuses for the market.
The EU and the UK have extensive competitiveness agendas, Mahmood explained, both with fairly new governments which look to simplify and consolidate rules that are already in place as part of their new mandate, rather than expanding the current rule book.
While the Middle East has significant growth agendas such as the Saudi Vision 2030 — focused on foreign investment and deepening liquidity — in the US, President Trump is looking to deregulate across multiple industries such as with digital assets, crypto and sustainability.
Following a cyber attack last year on one of the market’s trading platforms, Mahmood noted an increase in similar incidents across multiple different industries, including financial services. As a result, there is a “huge focus” from regulators on the reliance of critical third parties, particularly where several firms are dependent on a small group of providers.
Moving forward to the third theme of the year, Mahmood said that the UK’s move to introduce consumer duty rules in 2023 “set the stage” for other global regulators focusing on increasing investor protection rules.
She advised: “We need to make sure that those underlying retail clients are well educated about the product and are aware of the associated risks involved with that.”
Attendees of the conference also heard from Jisuk Kim, senior foreign attorney at Kim & Chang, who discussed movements in South Korea with the upcoming lift in its short sell ban, which is expected to come into effect on 31 March.
The short sell issue started back in 2021 from the amendment of the law strengthening the penalties for breaches in the short selling requirements and the government’s investigation over short selling practices of foreign institutions, amid vocal retail challenges against short selling by institutions, she explained.
Following investigations into short sale and stock borrowing and lending practices of foreign investors investing in Korea, Kim explained that penalties for short selling breaches have become stricter. “In fact, the supervisory authority imposed quite significant unprecedented amount of penalties. Also, intentional breaches in the short sale requirements can be subject to criminal liability.”
On the retail side, there have been complaints about not gaining equal opportunity with institutions, and the regulations have been amended in an effort to level the playing field, she noted.
Kim added: “Internal control requirements have become very prescriptive on the part of all players in the market. The implementation of the internal control at the institutional level will be a pre-requisite to engaging in short selling upon lifting of the short sale ban, and this is going to be a key factor going forward for anybody that wants to enter the short sale market.”
To help monitor short selling operations, Kim mentioned the development of a naked short sell detection system by the country’s stock exchange, which “is the first of its kind in the world”.
Kim believes there will be plenty of time spent this year in preparing to comply with the new requirements in order to engage in short selling in the market.
It was also recently announced that Korea would release the RFI regime, which allows financial institutions to access the Korean foreign exchange market from offshore by registry.
Kim said: “More players are now going to be able to participate. It was only banks and securities markets, but now insurance companies can do that also. Foreign RFIs will now be able to trade directly between each other.
“Custodians will be able to open up FX trading accounts to cater to their foreign clients interests. That's an area that is going to be pretty big for foreign investors to watch.”
Adding to the opportunities in APAC, China saw the recent introduction of Bond Connect offshore repo, which allows offshore participants to repo onshore bonds held by them via Bond Connect.
China has the second largest bond market globally. With the introduction of Bond Connect repo, there is a possibility to use onshore bonds for financial transactions.
While there are opportunities globally for the securities lending market, participants will be keeping a close watch on the changing regulatory landscape.
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