ISLA: Regulation has been the driving force
04 October 2018 London
Image: Shutterstock
“Regulation has been the driving force [in the industry], with a significant amount of refiguring”, said one panellist at this year’s International Securities Lending Association (ISLA) post-trade conference, in a panel discussing business drivers.
With many in the industry discussing the upcoming SFTR regulation, one panellist viewed regulation as a driver for opportunity and innovation going forward.
“We do have securities lending growing in importance and relevance,” the panellist argued, “but it has never been as relevant as it is today.”
Discussing key areas of focus in the industry, specifically, pledge, the panellist added: “One of the key areas of focus is the continued push for the balance sheet. Pledge has been at the top of our list in terms of it putting structure into place. It is also important because it is leveraging existing market infrastructures.”
“In my opinion, it makes it slightly quicker to market, it is also a dual-sided benefit, which makes it more attractive to borrowers—there is a premium in the transaction.”
Another panellist added: “There is certainly a trading opportunity with pledge.”
However, another panellist argued: “For me, the focus is not just pledge, central counterparties (CCP) is another outlook in addition to pledge.”
Discussing other key focuses in the market, one speaker noted that there is a lot of transparency in the current market and substantial competition between the prime brokers.
The panel also discussed Brexit, with one speaker outlining that the “main focus in regards to Brexit is positioning ourselves in terms of legal agreements. Regarding SFTR, I feel confident that there is not going to be too much of an issue or change there”.
The panellists were then asked if there are elements that can help with the changing service provisions.
In response, a speaker said: “We are trying to get those barriers down with a focus on balance sheet and by facing other counterparts, and with agility, you can look at beneficial tools. All of these things have a part to play in the market.”
One member of the audience asked the panel: “Is lack of liquidity still the case when liquidity crunches come (regarding HQLA’s), and are you hearing your counterparties bring that up?
One panellist replied “We saw scarcity on liquidity around 2016 since then national central banks have become more sophisticated. I don’t think currently there is any liquidity shortages - nothing outside the normal market practice.”
With many in the industry discussing the upcoming SFTR regulation, one panellist viewed regulation as a driver for opportunity and innovation going forward.
“We do have securities lending growing in importance and relevance,” the panellist argued, “but it has never been as relevant as it is today.”
Discussing key areas of focus in the industry, specifically, pledge, the panellist added: “One of the key areas of focus is the continued push for the balance sheet. Pledge has been at the top of our list in terms of it putting structure into place. It is also important because it is leveraging existing market infrastructures.”
“In my opinion, it makes it slightly quicker to market, it is also a dual-sided benefit, which makes it more attractive to borrowers—there is a premium in the transaction.”
Another panellist added: “There is certainly a trading opportunity with pledge.”
However, another panellist argued: “For me, the focus is not just pledge, central counterparties (CCP) is another outlook in addition to pledge.”
Discussing other key focuses in the market, one speaker noted that there is a lot of transparency in the current market and substantial competition between the prime brokers.
The panel also discussed Brexit, with one speaker outlining that the “main focus in regards to Brexit is positioning ourselves in terms of legal agreements. Regarding SFTR, I feel confident that there is not going to be too much of an issue or change there”.
The panellists were then asked if there are elements that can help with the changing service provisions.
In response, a speaker said: “We are trying to get those barriers down with a focus on balance sheet and by facing other counterparts, and with agility, you can look at beneficial tools. All of these things have a part to play in the market.”
One member of the audience asked the panel: “Is lack of liquidity still the case when liquidity crunches come (regarding HQLA’s), and are you hearing your counterparties bring that up?
One panellist replied “We saw scarcity on liquidity around 2016 since then national central banks have become more sophisticated. I don’t think currently there is any liquidity shortages - nothing outside the normal market practice.”
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