Securities finance-as-a-service, golden source transaction records and standardisation are areas of particular interest in the securities finance industry as it looks to the future, panelists at this year鈥檚 Securities 麻豆影视传媒 Technology Symposium agreed.
The topics were discussed at a panel entitled 鈥楽ecurities 麻豆影视传媒: The Future鈥�, in which speakers discussed their companies鈥� recent innovations and future plans, along with their own hopes for the future of the industry.
Matthew Barnett, head of operations at Sharegain, explained Sharegain鈥檚 recent work on securities finance-as-a-service, developing an end-to-end single-stock solution that covers all lifecycle events. He stated that recent capital market growth was due to retail investor engagement, a sector which does not have access to as much capital as larger market participants. Sharegain鈥檚 solution offers a more accessible service, with the ethos that accessibility and education are essential for the industry, Barnett said.
His fellow speakers raised concerns about the practicalities of offering securities finance-as-a-service. Kevin McNulty, head of RegTech Solutions Group at EquiLend, questioned whether retail investors were educated enough to make informed decisions, and Matthew Phillips, chief operating officer and head of delivery at Trading Apps, inquired where the line between regulation and consumer protections would be drawn when it came to the retail market.
To these questions, Barnett emphasised Sharegain鈥檚 focus on education and its approach to risk management, something that he said would be made possible through recent technological developments and the availability of real-time information.
McNulty went on to explain the need for a golden source transaction record, which distributed ledger technology (DLT) can now allow for. He recounted EquiLend鈥檚 investigation into industry pain points that could be solved with DLT, and the company鈥檚 conclusion that reconciliation was a key area where cost and effort could be reduced.
After the successful launch of their proof-of-concept solution, which has been volume tested, McNulty stated that the company will work with clients throughout 2023 to provide a market-viable product.
Shane Martin, global head of securities financing sales at Wematch.live, said that the adoption of tokenised assets was at its 鈥榠nfancy stage鈥� and that further developments would only be prompted by an industry event, such as shortened settlement cycles.
This was disputed by Phillips, who suggested that an adoption of a golden source in one area of the industry would allow further adoption in different areas, with an understanding of the infrastructure catalysing expansion.
McNulty reported that EquiLend has seen high firm buy-ins, with banks willing to spend money in this area. He added that the company was 鈥榪uietly confident鈥� in industry adoption, despite Phillips鈥� concerns that the shift to DLT requires a change in mindsets, with trust in technology having to take over from trust in counterparties.
Building on the need for this paradigm shift, the panel鈥檚 moderator questioned whether legacy technology would fade out or be replaced all at once. Barnett responded that although moving to new technology is 鈥榠nevitable鈥�, it will not happen in a 鈥榮ingle jump鈥�. Standards need to be put in place before the industry moves to this golden source, he said, but the change is something that should be driven by the industry, rather than regulatory pressure.
Michael Brown, senior associate at Clifford Chance, added that technology evolution will be iterative. With companies all vying for the same outcome and targeting the same audience, it is inevitable that different versions of 鈥榞olden sources鈥� will become obsolete, until there is only one remaining.
The importance of standardisation across the industry was an issue also raised by Phillips, who stated that by using the same methods and resulting in the same output format, the common domain model (CDM) will make it easier for counterparties to communicate in a shared 鈥榣anguage鈥�. CDM will be 鈥渢he glue that brings the industry together,鈥� he added.
Martin reported that WeMatch.live has seen shortened trade times and regulatory progress in total return swaps, with an industry focus on bringing liquidity to the market. With primes looking for better ways to manage their balance sheets, portfolios and assets, there has been a rise in the number of synthetics coming to market, he said.
Concluding the panel, the speakers shared their wishes for the near and mid-future of the securities finance industry. Barnett hoped to see broader market participation and improved capital markets infrastructure, with McNulty and Brown seconding the latter. Martin anticipated better resource allocation and market competition, while Phillips looked forward to the standardisation of risk assessments and contractual negotiations, which he considered significant barriers to market entry.
Image: Photocreo Bednarek 