Should the market have opted for a standardised SFTR solution?
05 November 2020 London
Image: Brian Jackson / Adobestock.com
The question of whether the securities finance industry should have collaborated on a standardised solution to the Securities Financing Transactions Regulation (SFTR) was posed to panellists at the SLT Securities Technology 麻豆影视传媒 Symposium.
Sarah Nicholson, partner at Consolo and panel moderator, queried whether, in hindsight, market participants would have been better served by a single reporting solution, as opposed to the patchwork quilt of service provider platforms that now exist.
Panellist David Lewis, senior director of securities finance at FIS, suggested that in a perfect world, a standardised solution would be 鈥渋deal鈥� but that in reality it 鈥渨asn鈥檛 practical鈥�.
鈥淚 think this is one of the first mandated regulations where an ISO 20022 standard is being applied, and it's from that level forward we have that standardisation, not before,鈥� he explains.
Lewis went on to describe the reality of the many divergent processes that go on, and in the time frame that is allowed across phase one, he explains, 鈥測ou wouldn鈥檛 be able to reorganise an entire industry, there's no way firms were going to cross that many hurdles to come to a single way of doing things鈥�.
The panellists also discussed how SFTR had stimulated a greater level of collaboration in the market but that a single solution would have eliminated the 鈥渉ealthy competition鈥� that often drives innovation.
To underscore this point, Joanne Salkeld, SFTR product manager at MarketAxess, stated that the joint SFTR solution with MarketAxess and EquiLend is their 鈥渂read and butter鈥�, but only having one vendor is particularly dangerous.
Salkeld also highlighted that multiple solution providers are necessary to protect against the scenario of the sole provider leaving the market. She further noted that the recent example of CME exiting the regulatory reporting space had created unexpected disruption for its clients but that this was mitigated by alternative providers that were ready and waiting to take them on.
Elsewhere, Lewis added that 鈥渁 great deal of good things come out of collaboration between firms, but says that it鈥檚 not all been plain sailing鈥� and the journey isn鈥檛 over yet.
Referring to Cappitech鈥檚 recent regulatory reporting market survey, Lewis highlighted that 46 percent of respondents consider SFTR a major challenge for 2021 and 66 percent give a lack of expertise as a major concern.
Highlighting specifically the lack of crossover between the experts in reporting with people who have knowledge of the specific markets such as securities lending and repo, 鈥渢he survey suggests that perhaps there aren鈥檛 many people who have their foot in both those camps,鈥� Lewis concludes.
As a result, service providers may need to extend a hand to one another to reinforce each others鈥� strengths and weaknesses and create a complete offering, such as in the case of EquiLend-MarketAxess.
Sarah Nicholson, partner at Consolo and panel moderator, queried whether, in hindsight, market participants would have been better served by a single reporting solution, as opposed to the patchwork quilt of service provider platforms that now exist.
Panellist David Lewis, senior director of securities finance at FIS, suggested that in a perfect world, a standardised solution would be 鈥渋deal鈥� but that in reality it 鈥渨asn鈥檛 practical鈥�.
鈥淚 think this is one of the first mandated regulations where an ISO 20022 standard is being applied, and it's from that level forward we have that standardisation, not before,鈥� he explains.
Lewis went on to describe the reality of the many divergent processes that go on, and in the time frame that is allowed across phase one, he explains, 鈥測ou wouldn鈥檛 be able to reorganise an entire industry, there's no way firms were going to cross that many hurdles to come to a single way of doing things鈥�.
The panellists also discussed how SFTR had stimulated a greater level of collaboration in the market but that a single solution would have eliminated the 鈥渉ealthy competition鈥� that often drives innovation.
To underscore this point, Joanne Salkeld, SFTR product manager at MarketAxess, stated that the joint SFTR solution with MarketAxess and EquiLend is their 鈥渂read and butter鈥�, but only having one vendor is particularly dangerous.
Salkeld also highlighted that multiple solution providers are necessary to protect against the scenario of the sole provider leaving the market. She further noted that the recent example of CME exiting the regulatory reporting space had created unexpected disruption for its clients but that this was mitigated by alternative providers that were ready and waiting to take them on.
Elsewhere, Lewis added that 鈥渁 great deal of good things come out of collaboration between firms, but says that it鈥檚 not all been plain sailing鈥� and the journey isn鈥檛 over yet.
Referring to Cappitech鈥檚 recent regulatory reporting market survey, Lewis highlighted that 46 percent of respondents consider SFTR a major challenge for 2021 and 66 percent give a lack of expertise as a major concern.
Highlighting specifically the lack of crossover between the experts in reporting with people who have knowledge of the specific markets such as securities lending and repo, 鈥渢he survey suggests that perhaps there aren鈥檛 many people who have their foot in both those camps,鈥� Lewis concludes.
As a result, service providers may need to extend a hand to one another to reinforce each others鈥� strengths and weaknesses and create a complete offering, such as in the case of EquiLend-MarketAxess.
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