Bringing the heat
16 October 2018
Attendees at this year’s RMA Conference on Securities Lending in Miami heard all about SFTR, technology and equality
Image: Shutterstock
In Miami, Florida, the quiet island town of Key Biscayne faced the insurmountable challenge of playing host to some of the biggest questions (and answers) in the securities finance industry.
For attendees of the Risk Management Association’s 35th Annual Conference on Securities Lending, old flames, such as the disruption of the Securities Finance Transactions Regulation (SFTR) continued to burn, while new challenges crept on the periphery.
In one panel at the event, those concerned about the volume of reporting under SFTR heard from speakers discussing how the regulation could prove difficult for intraday reporting.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will “drive volume” under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because “nothing will clarify the industry’s response like a deadline”.
Panellists said this was a “tall order” for associations and industry bodies, such as the International Securities Lending Association, which is currently working on guidelines.
“I think at this point we all agree we aren’t going to get more clarifications from the regulations. It’s on the industry to band together and have a consistent approach”, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm’s using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the “industry that needs to be taken care of”.
The speaker said: “There’s definitely a lot of concern in the industry on fees. We looked at the way we price under the European Market Infrastructures Regulation, which is based on a trade-based unique transaction identifier.”
“We questioned if this was a fair model under SFTR, but we don’t believe it is. We’re moving to a submission-based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.”
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was “too much”.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation. Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could “co-exist in the short to medium term”, but promoted SFTR as providing a “higher degree of granularity”.
Regulations also proved to be a driving force for some of the other topics discussed at the event, including the upcoming shift towards structured data, which some panellists said would provide great value to the industry.
In a panel discussion on the rise of financial technology and its impact on the industry, one speaker explained that regulations are forcing firms to live in a more digitised environment, which can be made harder by the persistence of unstructured data.
According to the speaker, unstructured data will make the move to distributed ledger technology and smart contracts much harder.
Another speaker noted that 90 percent of the world’s data has been generated in the last two years, highlighting the fact that the majority of this is unstructured data, which needs to be turned into structured data.
Once this has happened, firms can implement big data strategies to understand and draw value from structured data.
A panellist remarked on the computer science phrase “garbage in, garbage out”, which refers to flawed or nonsense input data that produces nonsense output.
The panellist said this would be different in the future, as the industry’s ability to apply machine learning techniques to unstructured data will allow firms to “reap garbage and create value”, effectively turning unstructured data into a commodity. In the future, hedge funds and other participants may even request unstructured data so that they can curate it themselves and create their own value.
However, the speaker said that the industry still had “legacy systems”, despite the fact that the “easiest thing to do in this century is replicate things digitally”.
While other industries, such as the entertainment industry, has been affected by this digitisation, the securities finance industry remains on these legacy systems, but the panellist warned that distributed ledger technology (DLT) would be the biggest disruptive technology in the industry.
According to the speaker, DLT will allow firms to share information across a peer-to-peer network while knowing with certainty that all participants will be seeing the same thing.
Another panellist warned that firms should be investing in this technology now because when it goes live it will be too late.
They said that firms would be at a “disadvantage” if they don’t put the work in now. Panellists identified people as the biggest barrier to new technologies and said that firms shouldn’t be afraid to implement these new technologies and “implement processes”.
One panellist said: “Leveraging technology and using it in a smart governed way, that is one of the facilitators, not necessarily a barrier to entry.”
Another panellist remarked that business models will change, so firms should not be scared of getting rid of departments or changing their business.
The panellist said that firms shouldn’t fear to re-engineer their old processes, as these new technologies grant them the tools to make the changes.
With new technologies and new tools comes the dilemma of directing your investment. In another session, speakers at the conference argued that firms shouldn’t just innovate for innovation’s sake, but rather look to provide solutions to problems in
the industry.
The speaker said that the industry needs to carefully decide what technology it should be investing in, as the financial technology market is booming, leaving firms questioning which service provider is the right one they should be partnering with.
Panellists discussed the rise of financial technology companies in the industry, warning that firms should be picky to ensure they get the right solution to their problem.
The panellist also questioned whether firms should be developing in-house systems or working with service providers. He said: “Do you build your own platform in-house? Do you get a platform to take you 80 percent there and then do the rest with your own intellectual property?”
With the added danger of upcoming regulations, technology is becoming more important than ever to ensure smooth transitioning, and panellists agreed that the use of big data can help to ease some of the burden brought by these regulations.
It was evident at the conference that those in the industry were seeing the wheels of progress turning, both in technology and in other emerging issues, such as equality.
One session at the conference was dedicated to women in the securities finance industry, where panellists discussed how women must “foster a connection” between each other to “empower” themselves professionally and promote their interests.
Speakers talked about the importance of networking, their driving forces in the industry, mentorship, confidence, and cognitive and observable diversity.
One speaker, reflecting on her career, said that her driving force has been to “learn more” and “be the best I can be”.
She expressed the importance of taking risks in her career and expressed the hope that others in the industry would follow
that ethos.
“In terms of turning points throughout my career, there have been times that I have taken risks, that’s when everything has paid off”, she said, “take calculated risks, even in times that they don’t seem to
be obvious”.
Another speaker discussed how one of the worst mistakes she made in her career was not taking the aforementioned advice.
She explained: “I worked hard and was good at what I did, but I didn’t ask for new positions. Part of me thought somebody would notice my hard work and give me a new position.”
“You need to speak up to let your managers know you are interested in other positions. To assume that will happen on its own is probably a mistake.”
Another speaker said that people should “challenge the status quo” and “ask difficult questions”.
The speaker remarked that firms should be “cultivating an opportunity to allow people to step back from their day to day, think about what they are doing, and cultivate an interest in something new, then they can take the risk.”
For some people, mentorship and sponsorship is a good avenue to aid in gaining recognition, they said.
One speaker explained the benefits of mentorship and sponsorship, especially for women and diverse candidates.
Another speaker said that she had benefited from two sponsors who had championed her career and helped her
gain recognition.
Later, speakers discussed confidence and observed its importance when rising through the ranks, building and running a business, and in networking.
One speaker said that confidence is a requirement for success, while another shared the advice she received early in her career: “Whatever you do, just be confident, and don’t screw up.”
Speakers reflected on the importance of preparedness in bringing about this confidence, and one panellist said that this confidence “doesn’t come easy for a lot of women”.
“For me, confidence comes when I am prepared”, she said, “it also comes when you are authentic to yourself and vocalise what your thoughts are.”
“In order to be truly confident, you have to make sure nobody takes your power away. If you are hosting a meeting, you need to host it. Sit at the head of the table and stop people from talking
over you.”
She concluded: “It’s difficult and hard to navigate, but if you approach it in the right way, it is instrumental in building your confidence.”
Another important part of continuing progression is ensuring you have a passion for your craft. A panellist said it was easy to lose this passion when working too hard.
One speaker said that passion is “critical” in everything. She explained: “It’s all intertwined, it’s infectious.”
Speaking to a room of majority women as a growing movement of diversity and inclusion takes over the industry, the speaker said: “Everyone in this room is accomplished, and has probably had a tough time getting here. It’s passion that
drives you.”
Almost 30 percent of speakers at the event were women, according to Tamela Merriweather, conference co-chair at
the event.
In the conference’s welcome remarks, Merriweather revealed the statistic, which is a growth of nearly 20 percent over the past five years.
Merriweather also revealed that 20 percent of the conference attendees were women, which is around a 5 percent rise from 2016.
This year’s event drew in a total of 515 attendees, with nearly
50 speakers.
For attendees of the Risk Management Association’s 35th Annual Conference on Securities Lending, old flames, such as the disruption of the Securities Finance Transactions Regulation (SFTR) continued to burn, while new challenges crept on the periphery.
In one panel at the event, those concerned about the volume of reporting under SFTR heard from speakers discussing how the regulation could prove difficult for intraday reporting.
One panellist said many things can happen throughout the lifecycle of a trade and all of these issues will have to be reported.
These concerns will “drive volume” under the reporting obligation.
Another panellist remarked on the problems that may arise from reporting on a trade that never actually happened. To avoid this, panellists said it would be important to develop ground rules for the regulation.
Industry bodies will need to develop these ground rules soon to ensure firms are prepared for SFTR, and a speaker said that they would like to see the rules adopted because “nothing will clarify the industry’s response like a deadline”.
Panellists said this was a “tall order” for associations and industry bodies, such as the International Securities Lending Association, which is currently working on guidelines.
“I think at this point we all agree we aren’t going to get more clarifications from the regulations. It’s on the industry to band together and have a consistent approach”, another panellist remarked.
Another concern raised on the panel was the issue of fees for firm’s using trade repositories (TR).
One speaker who represented a TR said that, first and foremost, it is the “industry that needs to be taken care of”.
The speaker said: “There’s definitely a lot of concern in the industry on fees. We looked at the way we price under the European Market Infrastructures Regulation, which is based on a trade-based unique transaction identifier.”
“We questioned if this was a fair model under SFTR, but we don’t believe it is. We’re moving to a submission-based pricing model, being an industry-owned organisation, we have to effectively provide for costs and a small margin.”
Panellists were also concerned about whether European regulators could amend the regulation if they were to decide that the requirement was “too much”.
While changes are possible, one panellist said it would be difficult to adjust within the first two years, due to EU regulatory constraints within the first two years of implementation. Speakers also discussed whether, under the reporting requirements, now was a good time to begin using a central counterparty (CCP) structure.
One panellist said the CCP structure was a good idea but warned that if securities lending revenue becomes de minimis, it might result in a shift away from physical lending to synthetic lending.
Panellists discussed SFTR in the context of the Automated Loan Deposit (ALD) requirements.
Speakers observed the similarities between the two reporting requirements and questioned how the SFTR would effect ALD.
One speaker said that the requirements could “co-exist in the short to medium term”, but promoted SFTR as providing a “higher degree of granularity”.
Regulations also proved to be a driving force for some of the other topics discussed at the event, including the upcoming shift towards structured data, which some panellists said would provide great value to the industry.
In a panel discussion on the rise of financial technology and its impact on the industry, one speaker explained that regulations are forcing firms to live in a more digitised environment, which can be made harder by the persistence of unstructured data.
According to the speaker, unstructured data will make the move to distributed ledger technology and smart contracts much harder.
Another speaker noted that 90 percent of the world’s data has been generated in the last two years, highlighting the fact that the majority of this is unstructured data, which needs to be turned into structured data.
Once this has happened, firms can implement big data strategies to understand and draw value from structured data.
A panellist remarked on the computer science phrase “garbage in, garbage out”, which refers to flawed or nonsense input data that produces nonsense output.
The panellist said this would be different in the future, as the industry’s ability to apply machine learning techniques to unstructured data will allow firms to “reap garbage and create value”, effectively turning unstructured data into a commodity. In the future, hedge funds and other participants may even request unstructured data so that they can curate it themselves and create their own value.
However, the speaker said that the industry still had “legacy systems”, despite the fact that the “easiest thing to do in this century is replicate things digitally”.
While other industries, such as the entertainment industry, has been affected by this digitisation, the securities finance industry remains on these legacy systems, but the panellist warned that distributed ledger technology (DLT) would be the biggest disruptive technology in the industry.
According to the speaker, DLT will allow firms to share information across a peer-to-peer network while knowing with certainty that all participants will be seeing the same thing.
Another panellist warned that firms should be investing in this technology now because when it goes live it will be too late.
They said that firms would be at a “disadvantage” if they don’t put the work in now. Panellists identified people as the biggest barrier to new technologies and said that firms shouldn’t be afraid to implement these new technologies and “implement processes”.
One panellist said: “Leveraging technology and using it in a smart governed way, that is one of the facilitators, not necessarily a barrier to entry.”
Another panellist remarked that business models will change, so firms should not be scared of getting rid of departments or changing their business.
The panellist said that firms shouldn’t fear to re-engineer their old processes, as these new technologies grant them the tools to make the changes.
With new technologies and new tools comes the dilemma of directing your investment. In another session, speakers at the conference argued that firms shouldn’t just innovate for innovation’s sake, but rather look to provide solutions to problems in
the industry.
The speaker said that the industry needs to carefully decide what technology it should be investing in, as the financial technology market is booming, leaving firms questioning which service provider is the right one they should be partnering with.
Panellists discussed the rise of financial technology companies in the industry, warning that firms should be picky to ensure they get the right solution to their problem.
The panellist also questioned whether firms should be developing in-house systems or working with service providers. He said: “Do you build your own platform in-house? Do you get a platform to take you 80 percent there and then do the rest with your own intellectual property?”
With the added danger of upcoming regulations, technology is becoming more important than ever to ensure smooth transitioning, and panellists agreed that the use of big data can help to ease some of the burden brought by these regulations.
It was evident at the conference that those in the industry were seeing the wheels of progress turning, both in technology and in other emerging issues, such as equality.
One session at the conference was dedicated to women in the securities finance industry, where panellists discussed how women must “foster a connection” between each other to “empower” themselves professionally and promote their interests.
Speakers talked about the importance of networking, their driving forces in the industry, mentorship, confidence, and cognitive and observable diversity.
One speaker, reflecting on her career, said that her driving force has been to “learn more” and “be the best I can be”.
She expressed the importance of taking risks in her career and expressed the hope that others in the industry would follow
that ethos.
“In terms of turning points throughout my career, there have been times that I have taken risks, that’s when everything has paid off”, she said, “take calculated risks, even in times that they don’t seem to
be obvious”.
Another speaker discussed how one of the worst mistakes she made in her career was not taking the aforementioned advice.
She explained: “I worked hard and was good at what I did, but I didn’t ask for new positions. Part of me thought somebody would notice my hard work and give me a new position.”
“You need to speak up to let your managers know you are interested in other positions. To assume that will happen on its own is probably a mistake.”
Another speaker said that people should “challenge the status quo” and “ask difficult questions”.
The speaker remarked that firms should be “cultivating an opportunity to allow people to step back from their day to day, think about what they are doing, and cultivate an interest in something new, then they can take the risk.”
For some people, mentorship and sponsorship is a good avenue to aid in gaining recognition, they said.
One speaker explained the benefits of mentorship and sponsorship, especially for women and diverse candidates.
Another speaker said that she had benefited from two sponsors who had championed her career and helped her
gain recognition.
Later, speakers discussed confidence and observed its importance when rising through the ranks, building and running a business, and in networking.
One speaker said that confidence is a requirement for success, while another shared the advice she received early in her career: “Whatever you do, just be confident, and don’t screw up.”
Speakers reflected on the importance of preparedness in bringing about this confidence, and one panellist said that this confidence “doesn’t come easy for a lot of women”.
“For me, confidence comes when I am prepared”, she said, “it also comes when you are authentic to yourself and vocalise what your thoughts are.”
“In order to be truly confident, you have to make sure nobody takes your power away. If you are hosting a meeting, you need to host it. Sit at the head of the table and stop people from talking
over you.”
She concluded: “It’s difficult and hard to navigate, but if you approach it in the right way, it is instrumental in building your confidence.”
Another important part of continuing progression is ensuring you have a passion for your craft. A panellist said it was easy to lose this passion when working too hard.
One speaker said that passion is “critical” in everything. She explained: “It’s all intertwined, it’s infectious.”
Speaking to a room of majority women as a growing movement of diversity and inclusion takes over the industry, the speaker said: “Everyone in this room is accomplished, and has probably had a tough time getting here. It’s passion that
drives you.”
Almost 30 percent of speakers at the event were women, according to Tamela Merriweather, conference co-chair at
the event.
In the conference’s welcome remarks, Merriweather revealed the statistic, which is a growth of nearly 20 percent over the past five years.
Merriweather also revealed that 20 percent of the conference attendees were women, which is around a 5 percent rise from 2016.
This year’s event drew in a total of 515 attendees, with nearly
50 speakers.
NO FEE, NO RISK
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
100% ON RETURNS If you invest in only one securities finance news source this year, make sure it is your free subscription to Securities Finance Times
