Securities Finance Symposium: From regulation to repo
14 May 2024
With the stunning skyline of Boston as its backdrop, the Securities Finance Symposium saw a range of industry experts discuss everything from upcoming regulation and the repo markets, to automation and AI in securities lending. Karl Loomes and Sophie Downes report
Image: Andrew Davis
Kicking off a fantastic day at the iconic State Room in the heart of Boston, Tim Smith, managing director of Data Insights at Hazeltree, offered his perspective on the current state of the market, delving into global trends with the help of data from S&P Global Intelligence.
This proved to be just one of the myriad topics discussed and debated by the various panels throughout the day. No hot topic was off limits.
Industry Regulation
Rule 10c-1a is “going to be transformative”, said Igor Kaplun, global head of Business Development, S&P Global Market Intelligence Cappitech.
The new regulation was introduced by the Securities and Exchange commission to increase transparency in the market. It requires the reporting agent to report information to a registered national securities association (RNSA) by the end of the same day.
However, the panel discussion focused on the inherent challenges this regulation will bring. Jonathan Lee argued the rule is “more complex” than it first appears: “It will be expensive to implement, and difficult to put into practice,” he explained.
The panel concurred, predicting an extension would be needed in order for market participants to respond effectively.
Another panellist held a more optimistic view, arguing the regulation would be a chance to make improvements within the market. He explained how firms are struggling with dealing with data quality and suggested the new regulation could help to mitigate this.
In the second half of the panel, discussion shifted to the Office of Financial Research’s (OFR) final rule, adopted on 6 May.
According to the OFR, the Final Rule aims to improve transparency within the US repurchase agreement (repo) market by establishing a data collection for non-centrally cleared bilateral transactions.
However, once again, the panellists voiced similar concerns. Jonathan Lee’s discussion of the various ways this rule would manifest, including daily reporting to the OFR by US covered reporters, elicited an audible response for audience members.
Lee described the ‘rude awakening’ the rule will have on various market participants. “Firms have got a very short space of time to implement what's going to be highly scrutinised reporting,” he said.
“This won’t just be in the US, but on a global basis. It's very much front and centre of systemic risk.”
Despite the panel’s consideration of the challenges posed by upcoming regulation, Igor Kaplun upheld a measured stance of the regulatory process.
“The first rollout is never going to be perfect,” he argued, highlighting the various alterations that have been made to regulations over the past year, across various jurisdictions.
“The goal of the regulator is to use that data to monitor systemic risk. It’s not just getting data in, but asking does this data make sense, and what does it say?”
Repo market outlook
From the buy side there is a lot of liquidity in the market, and, as always, cash is king. So said the panel at this year’s Securities Finance Symposium in Boston, when discussing the repo market outlook and sharing their thoughts on its current state.
“We all hope the interest rate curve normalises,” said Curtis Murphy, vice president, portfolio manager, global fixed income team, of State Street Global Advisors, touching on a subject that underpinned much of the discussion.
Staying with macroeconomics, Glenn Havlicek, CEO and co-founder of GLMX, asked another question that arose throughout the panel — given geopolitical turmoil, interest rates and the national deficit (particularly in the US), is an inflation target of two per cent still a realistic expectation?
When looking at repo, the market is liquid, according to Travis Keltner, head of secured financing, State Street, though he does believe it to be more “fragile” year-on-year (YoY). He puts across a positive view however, one that is mirrored by many in the panel as the discussion continues — in times of risk and uncertainty, opportunity is often also abound.
Bonita Blaney, vice president of Securities Finance and Collateral Management at Broadridge, highlights another trend she is seeing from her clients — demand for automation is increasing. It comes as no surprise as firms try to process increasing volumes.
Clearing also came up as an important topic of discussion — both in its current state, and asking if there are any possible alternatives given the upcoming Securities and Exchange Commission (SEC) clearing requirements. In answer to the latter question, Travis succinctly sums up his opinion: “You are never going to replace the liquidity of, and demand for clearing.”
With the possibility that some alternative solutions may be exempt, or not covered by, clearing regulation, the panel agreed that all areas should be explored. “There are a lot of ways to skin a cat,” noted Havlicek.
Ending with the slightly ominous question — what is keeping you up at night? — another hot topic received a notable mention: cybersecurity.
With a number of high-profile cybersecurity breaches in recent years, the panel highlighted the importance of this as a key concern for the industry.
In the classic tech conundrum, the power to fight hacking needs to stay one step ahead of the ever growing landscape and ingenuity of those on the other side. As one member of the panel noted with some humour, when a teenager decides to put down their computer console and hack you, you better be ready.
T+1
“Everyone has been impacted by T+1 in some form or another,” said Vinod Jain, strategic advisor, Datos Insights, at the Securities Finance Symposium in Boston.
The panel centred around the impending transition in the US to a shorter settlement cycle, and the extensive work done by the industry in the lead up.
One panellist described how many of the large firms had begun preparations early. She described how her company had shifted its focus since the beginning of the year to metrics, and building additional messaging capabilities.
Mike Norwood, head of trading solutions at EquiLend, also touched on the “long runway” the industry has had for T+1, suggesting it was the natural next step within the market. “Everything has moved towards accelerated processing and increased efficiency, whether it’s reporting or settlement,” he commented.
The discussion also touched on the ways in which market participants needed to work together to make the transition as smooth as possible.
For Tom Poppey, head of product strategy for securities lending at Brown Brothers Harriman, a collaborative effort is needed by all players along the lending value chain, arguing “we’re only as strong as our weakest link”.
As a member of the executive council, he pointed to the revised best practice of the Risk Management Association (RMA), as a proposed series of actions agent lenders can take to prepare for T+1.
While the panellists were positive about the implementation of T+1, they agreed that there would be inevitable challenges as the market adapted.
“There’s going to be stumbles by market participants that may not have adequately prepared. It might take a while, but the market is going to be better, ultimately stronger, and more resilient as a result,” argued Poppey.
“There’s going to be speed bumps,” concurred Thomas Veneziano, product director, head of NAM Product at Pirum Systems. “We need to note the pain points and learn from them, so that the next transition will be even smoother.”
Nevertheless, panellists remained optimistic. As Veneziano concluded: “This industry has a way of working itself out.” Norwood was even more optimistic — “T+1 is going to be smoother than we all give it credit for”.
The evolving world of securities finance
A broad topic to cover, but one the esteemed panel at this year’s Securities Finance Symposium in Boston were eager to address. From data transparency to artificial intelligence (AI), a number of hot topics were looked at.
A running theme throughout the discussion was data transparency. Though this comes in many different forms, perhaps the general consensus can be best summarised by the thoughts of Anthony Toscano, executive vice president and head of Global Securities Lending Solutions in North America, MUFG Investor Services: “More data and transparency is good, but it would be helpful to know what it will be used for.”
Going a step further, Elaine Hannigan, director of equity finance at Scotiabank, expresses hope that more transparency may even help prevent, or at least aid in dealing with, the next financial crisis — the 2008 crash remains at the forefront of the industry’s mind when talking about transparency and regulation.
Technology and AI also took prime-position during the discussion, though cybersecurity and operational resilience were a key area the panel was keen to address. Despite concerns that improved security, and the costs associated with it, were in essence another ‘tax’, the importance of robust protection was unanimously agreed on.
As James Curtis, vice president of US Agency Lending Trading at Fidelity Investments, puts it, “Cybersecurity is at the front of everyone’s mind, in businesses large and small”.
Discussing AI, its benefits in the summary and distilling of vast amounts of data were highlighted as of key potential importance to the industry. Its predictive ability, too, was a notable insertion often not mentioned. From macroeconomic trends to security price predictions, AI, it seems, may have a lot to live up to.
Closing up with final thoughts, it was almost inevitable that T+1 would be part of the conversation. Mirroring a sentiment gaining more traction in many circles, Divyesh Bhakta, CEO at FinOptSys, poetically described his view: “T+1 is the appetiser — T+0 is coming.”
Always good to end on a positive note, and with risk, new technology, and regulations often seen as casting a shadow, Robert Sackett, head of prime financing at Clear Street, reiterates that he is bullish for the industry. “It’s a people business”, he says, and you will always need those human relationships even in the age of AI.
Securities finance leaders in lending
The industry faces an exciting few years ahead, according to panellists at the Securities Finance Symposium in Boston.
In a panel discussion titled ‘Leaders in Lending’, speakers discussed strategies for adapting to a changing market and navigating regulatory demands.
Discussion began with a consideration of upcoming points of interest for panellists in 2024-25.
Sarah Holmes, global head of securities lending at Brown Brothers Harriman, explained how a big area of focus for her firm is promoting talent, and fostering a greater sense of belonging.
Oberon Knapp, executive director of participant solutions, and head of securities lending at OCC, agreed. Speaking of the historically narrow representation within the finance industry, he argued it was important to increase diversity within the next generation of the workforce.
The question of AI was also a pertinent discussion point, exploring the changes this could implement within markets.
Speakers highlighted how younger generations entering the workforce are more comfortable with AI tools than the current workforce, suggesting their expectations around technology adoption will impact retention and recruitment within the industry.
The use cases of AI were also touched on. Nancy Allen, head of Data & Analytics Solutions at EquiLend, discussed how the firm is looking into using AI to instantly provide data — for example, with top earning securities or equities portfolios — to free up people's time for more valuable work.
Nehal Udeshi, managing director, head of securities finance at BNY Mellon Markets, discussed the use of data in her firm, recounting how clients are pushing for bundled collateral, liquidity, and financing solutions delivered through integrated technology platforms.
She argued that firms need to think about solutions that can service the needs of both traditional and non-traditional borrowers and lenders.
The panel concluded with optimistic and excited evaluations of what the next few years will bring, noting that the industry is arguably seeing more dramatic change than it has in a long time.
As Knapp said: “The market structure is going to change, but it's going to change the way that all of us are participating.
“This is an industry full of solution oriented people. We tend to work well together and collaborate, and I'm really just excited to see what the next couple years will bring.”
This proved to be just one of the myriad topics discussed and debated by the various panels throughout the day. No hot topic was off limits.
Industry Regulation
Rule 10c-1a is “going to be transformative”, said Igor Kaplun, global head of Business Development, S&P Global Market Intelligence Cappitech.
The new regulation was introduced by the Securities and Exchange commission to increase transparency in the market. It requires the reporting agent to report information to a registered national securities association (RNSA) by the end of the same day.
However, the panel discussion focused on the inherent challenges this regulation will bring. Jonathan Lee argued the rule is “more complex” than it first appears: “It will be expensive to implement, and difficult to put into practice,” he explained.
The panel concurred, predicting an extension would be needed in order for market participants to respond effectively.
Another panellist held a more optimistic view, arguing the regulation would be a chance to make improvements within the market. He explained how firms are struggling with dealing with data quality and suggested the new regulation could help to mitigate this.
In the second half of the panel, discussion shifted to the Office of Financial Research’s (OFR) final rule, adopted on 6 May.
According to the OFR, the Final Rule aims to improve transparency within the US repurchase agreement (repo) market by establishing a data collection for non-centrally cleared bilateral transactions.
However, once again, the panellists voiced similar concerns. Jonathan Lee’s discussion of the various ways this rule would manifest, including daily reporting to the OFR by US covered reporters, elicited an audible response for audience members.
Lee described the ‘rude awakening’ the rule will have on various market participants. “Firms have got a very short space of time to implement what's going to be highly scrutinised reporting,” he said.
“This won’t just be in the US, but on a global basis. It's very much front and centre of systemic risk.”
Despite the panel’s consideration of the challenges posed by upcoming regulation, Igor Kaplun upheld a measured stance of the regulatory process.
“The first rollout is never going to be perfect,” he argued, highlighting the various alterations that have been made to regulations over the past year, across various jurisdictions.
“The goal of the regulator is to use that data to monitor systemic risk. It’s not just getting data in, but asking does this data make sense, and what does it say?”
Repo market outlook
From the buy side there is a lot of liquidity in the market, and, as always, cash is king. So said the panel at this year’s Securities Finance Symposium in Boston, when discussing the repo market outlook and sharing their thoughts on its current state.
“We all hope the interest rate curve normalises,” said Curtis Murphy, vice president, portfolio manager, global fixed income team, of State Street Global Advisors, touching on a subject that underpinned much of the discussion.
Staying with macroeconomics, Glenn Havlicek, CEO and co-founder of GLMX, asked another question that arose throughout the panel — given geopolitical turmoil, interest rates and the national deficit (particularly in the US), is an inflation target of two per cent still a realistic expectation?
When looking at repo, the market is liquid, according to Travis Keltner, head of secured financing, State Street, though he does believe it to be more “fragile” year-on-year (YoY). He puts across a positive view however, one that is mirrored by many in the panel as the discussion continues — in times of risk and uncertainty, opportunity is often also abound.
Bonita Blaney, vice president of Securities Finance and Collateral Management at Broadridge, highlights another trend she is seeing from her clients — demand for automation is increasing. It comes as no surprise as firms try to process increasing volumes.
Clearing also came up as an important topic of discussion — both in its current state, and asking if there are any possible alternatives given the upcoming Securities and Exchange Commission (SEC) clearing requirements. In answer to the latter question, Travis succinctly sums up his opinion: “You are never going to replace the liquidity of, and demand for clearing.”
With the possibility that some alternative solutions may be exempt, or not covered by, clearing regulation, the panel agreed that all areas should be explored. “There are a lot of ways to skin a cat,” noted Havlicek.
Ending with the slightly ominous question — what is keeping you up at night? — another hot topic received a notable mention: cybersecurity.
With a number of high-profile cybersecurity breaches in recent years, the panel highlighted the importance of this as a key concern for the industry.
In the classic tech conundrum, the power to fight hacking needs to stay one step ahead of the ever growing landscape and ingenuity of those on the other side. As one member of the panel noted with some humour, when a teenager decides to put down their computer console and hack you, you better be ready.
T+1
“Everyone has been impacted by T+1 in some form or another,” said Vinod Jain, strategic advisor, Datos Insights, at the Securities Finance Symposium in Boston.
The panel centred around the impending transition in the US to a shorter settlement cycle, and the extensive work done by the industry in the lead up.
One panellist described how many of the large firms had begun preparations early. She described how her company had shifted its focus since the beginning of the year to metrics, and building additional messaging capabilities.
Mike Norwood, head of trading solutions at EquiLend, also touched on the “long runway” the industry has had for T+1, suggesting it was the natural next step within the market. “Everything has moved towards accelerated processing and increased efficiency, whether it’s reporting or settlement,” he commented.
The discussion also touched on the ways in which market participants needed to work together to make the transition as smooth as possible.
For Tom Poppey, head of product strategy for securities lending at Brown Brothers Harriman, a collaborative effort is needed by all players along the lending value chain, arguing “we’re only as strong as our weakest link”.
As a member of the executive council, he pointed to the revised best practice of the Risk Management Association (RMA), as a proposed series of actions agent lenders can take to prepare for T+1.
While the panellists were positive about the implementation of T+1, they agreed that there would be inevitable challenges as the market adapted.
“There’s going to be stumbles by market participants that may not have adequately prepared. It might take a while, but the market is going to be better, ultimately stronger, and more resilient as a result,” argued Poppey.
“There’s going to be speed bumps,” concurred Thomas Veneziano, product director, head of NAM Product at Pirum Systems. “We need to note the pain points and learn from them, so that the next transition will be even smoother.”
Nevertheless, panellists remained optimistic. As Veneziano concluded: “This industry has a way of working itself out.” Norwood was even more optimistic — “T+1 is going to be smoother than we all give it credit for”.
The evolving world of securities finance
A broad topic to cover, but one the esteemed panel at this year’s Securities Finance Symposium in Boston were eager to address. From data transparency to artificial intelligence (AI), a number of hot topics were looked at.
A running theme throughout the discussion was data transparency. Though this comes in many different forms, perhaps the general consensus can be best summarised by the thoughts of Anthony Toscano, executive vice president and head of Global Securities Lending Solutions in North America, MUFG Investor Services: “More data and transparency is good, but it would be helpful to know what it will be used for.”
Going a step further, Elaine Hannigan, director of equity finance at Scotiabank, expresses hope that more transparency may even help prevent, or at least aid in dealing with, the next financial crisis — the 2008 crash remains at the forefront of the industry’s mind when talking about transparency and regulation.
Technology and AI also took prime-position during the discussion, though cybersecurity and operational resilience were a key area the panel was keen to address. Despite concerns that improved security, and the costs associated with it, were in essence another ‘tax’, the importance of robust protection was unanimously agreed on.
As James Curtis, vice president of US Agency Lending Trading at Fidelity Investments, puts it, “Cybersecurity is at the front of everyone’s mind, in businesses large and small”.
Discussing AI, its benefits in the summary and distilling of vast amounts of data were highlighted as of key potential importance to the industry. Its predictive ability, too, was a notable insertion often not mentioned. From macroeconomic trends to security price predictions, AI, it seems, may have a lot to live up to.
Closing up with final thoughts, it was almost inevitable that T+1 would be part of the conversation. Mirroring a sentiment gaining more traction in many circles, Divyesh Bhakta, CEO at FinOptSys, poetically described his view: “T+1 is the appetiser — T+0 is coming.”
Always good to end on a positive note, and with risk, new technology, and regulations often seen as casting a shadow, Robert Sackett, head of prime financing at Clear Street, reiterates that he is bullish for the industry. “It’s a people business”, he says, and you will always need those human relationships even in the age of AI.
Securities finance leaders in lending
The industry faces an exciting few years ahead, according to panellists at the Securities Finance Symposium in Boston.
In a panel discussion titled ‘Leaders in Lending’, speakers discussed strategies for adapting to a changing market and navigating regulatory demands.
Discussion began with a consideration of upcoming points of interest for panellists in 2024-25.
Sarah Holmes, global head of securities lending at Brown Brothers Harriman, explained how a big area of focus for her firm is promoting talent, and fostering a greater sense of belonging.
Oberon Knapp, executive director of participant solutions, and head of securities lending at OCC, agreed. Speaking of the historically narrow representation within the finance industry, he argued it was important to increase diversity within the next generation of the workforce.
The question of AI was also a pertinent discussion point, exploring the changes this could implement within markets.
Speakers highlighted how younger generations entering the workforce are more comfortable with AI tools than the current workforce, suggesting their expectations around technology adoption will impact retention and recruitment within the industry.
The use cases of AI were also touched on. Nancy Allen, head of Data & Analytics Solutions at EquiLend, discussed how the firm is looking into using AI to instantly provide data — for example, with top earning securities or equities portfolios — to free up people's time for more valuable work.
Nehal Udeshi, managing director, head of securities finance at BNY Mellon Markets, discussed the use of data in her firm, recounting how clients are pushing for bundled collateral, liquidity, and financing solutions delivered through integrated technology platforms.
She argued that firms need to think about solutions that can service the needs of both traditional and non-traditional borrowers and lenders.
The panel concluded with optimistic and excited evaluations of what the next few years will bring, noting that the industry is arguably seeing more dramatic change than it has in a long time.
As Knapp said: “The market structure is going to change, but it's going to change the way that all of us are participating.
“This is an industry full of solution oriented people. We tend to work well together and collaborate, and I'm really just excited to see what the next couple years will bring.”
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